What is a New York Auto Dealer Bond?
Businesses that operate as new or franchised auto dealerships in the state of New York are required to hold a valid auto dealer license. As part of the licensing requirements, a New York auto dealer bond is also necessary. A New York auto dealer bond is a guarantee that a licensed auto dealership will work with customers according to state laws. If a customer suffers financial harm when dealing with a dealership, a claim can be made against its New York auto dealer bond.
A bond is a form of security that is structured as a three-party contract between a principal, an obligee, and a surety. The principal is the auto dealership required to secure an auto dealer bond. The obligee is the state’s licensing authority; in New York, this is the New York State Department of Motor Vehicles. Finally, the surety is the company providing the bond guarantee to the principal.
Do I Need a New York Auto Dealer Bond?
Individuals and businesses engaged in selling motor vehicles for a profit are required to hold a valid auto dealer license in New York, like many other states. A New York auto dealer bond is necessary as part of the licensing application process for franchised dealers as well as used auto dealers. Motor vehicle dealers selling only trailers, motorcycles, or recreational vehicles are exempt from the New York auto dealer bond requirements.
Obligee Information for New York Auto Dealer Bonds
New York state law gives authority to the Department of Motor Vehicles to manage licensing requirements for auto dealers, including the need to secure a New York auto dealer bond. As the obligee, the department is the recipient of bond details along with licensing applications and other documentation. The obligee contact information is as follows:
New York State Department of Motor Vehicles
Bureau of Consumer & Facility Services
P.O. Box 2700
Albany, NY 12220
What Does a New York Auto Dealer Bond Cost?
A New York auto dealer bond of either $25,000 or $100,000 is required for used car dealerships, while a $50,000 bond is necessary for franchised dealerships. However, a licensed auto dealer is not required to pay the entire amount of the bond. Only a percentage of the bond amount is paid to obtain a New York auto dealer bond, ranging from 1 to 10%.
The price you pay for an auto dealer bond depends on your credit score and your business financial standing. Poor credit due to civil judgments, liens, missed payments on debts, or bankruptcy means you are a higher risk bondholder. Because of this risk, your bond premium will be higher than for auto dealers with strong or excellent credit.
How Do You Get a New York Auto Dealer Bond?
You can start the process of securing a New York auto dealer bond by submitting a brief form online. The surety company will provide a fast quote for your bond, as well as instructions on how to complete the bonding application.
New York Auto Dealer Bond Term and Expiration Date
New York auto dealer bonds have a two-year term, in line with the auto dealer’s license expiration date. This means that bi-annually, licensed motor vehicle dealers must renew their New York auto dealer bond to remain in compliance with state laws and regulations.