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.
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.