What is a North Dakota Auto Dealer Bond?
Many states require auto dealerships to obtain a license prior to doing business with customers. One component of the licensing process is posting a North Dakota auto dealer bond for new and used car dealerships operating in the state. A North Dakota auto dealer bond works as a form of security against fraud for customers doing business with the dealership. It also ensures a licensed auto dealer complies with state regulations and industry standards.
Similar to other surety bonds, a North Dakota auto dealer bond includes three parties: the principal required to obtain the bond, the obligee, in this case, the North Dakota Department of Transportation, requiring a bond, and the surety company providing the bond. When a claim is made against a bond, the surety company pays the claim amount, but the principal is responsible for repaying any claims.
What Does a North Dakota Auto Dealer Bond Cost?
A North Dakota auto dealer bond of $25,000 is required for all new and used dealerships. However, an auto dealer is not required to pay the full bond amount. Instead, dealers pay a small percentage of the bond requirement, ranging from 1 to 10% of the total. The percentage you pay depends on your personal credit history and financial standing of your business.
Because the surety company extends payment for claims on your behalf, there is risk involved in providing an auto dealer bond. Dealers with bad credit pose a greater risk to the surety than dealers who have a higher credit score. To offset increased risk, the surety company charges a higher percentage of the bond for auto dealers with bad credit.
How Do I Get a North Dakota Auto Dealer Bond?
Securing a North Dakota auto dealer bond starts by submitting a brief online application. Your business details and personal credit are reviewed, and the surety company then provides you with a quote for your auto dealer bond.