What is a Rhode Island Auto Dealer Bond?
Most states require motor vehicle dealers to have a license before opening their doors to the public. One crucial part of the licensing process in Rhode Island is having a valid surety bond in place, known as a Rhode Island auto dealer bond. An auto dealer bond is meant to protect customers that conduct business with the auto dealer, as well as the state, from unlawful business practices.
Unlike insurance, a Rhode Island auto dealer bond claim pays compensation to the customer or the state's licensing agency should the business fail to meet its obligations under the law. The surety company providing the bond to the dealer initially pays for the claim up to the bond limit, but the auto dealer is responsible for repaying any successful claims over time.
Who Needs a Rhode Island Auto Dealer Bond?
An auto dealer is defined as any individual or business operating in the state of Rhode Island that engages in the sale of motor vehicles. Both new and used auto dealers are required to have a license to do business and a corresponding auto dealer bond. Motorcycle and moped dealers must also have a license and a Rhode Island auto dealer bond to comply with regulations.
Rhode Island Auto Dealer Bond Obligee Details
Surety bonds represent a contract between three different parties, starting with the auto dealer responsible for securing a bond. The auto dealer is known as the principal of the bond. A surety company provides the bond to the principal, and the state licensing agency receives this information once the bond is in place. The department responsible for overseeing auto dealers in Rhode Island is known as the obligee of the bond.
In Rhode Island, the obligee of an auto dealer bond is as follows:
State of Rhode Island Division of Motor Vehicles
Dealers' License and Regulation Office
600 New London Avenue
Cranston, Rhode Island 02920
How Much Does a Rhode Island Auto Dealer Bond Cost?
Securing a bond comes at a cost for licensed Rhode Island auto dealers, but in most cases, it is a small amount. The surety company providing the bond looks at the total bond amount required as well as financial aspects of the dealer to determine the cost. Auto dealers must have a bond of at least $50,000 in place in order to comply with licensing rules, but this is not the cost of the bond.
Instead, the price of a Rhode Island auto dealer bond ranges from 1 to 10% of the bond total. The surety company considers how much risk the auto dealer represents by evaluating the financial standing of the dealership and personal credit score of the auto dealer. If an individual has had a spotted credit history, including significant late payments, collections, court judgments, or liens, they are likely to pay a higher percentage of the bond total than auto dealers with a healthy credit history.
How do You Get a Rhode Island Auto Dealer Bond?
You can begin the process of obtaining a Rhode Island auto dealer bond by submitting a brief application online. The surety company reviews the amount of the bond as well as credit history, and based on this information, offers a bond quote. Once the bond is paid for, information is sent to the obligee to finalize the process. Rhode Island auto dealers must remember to renew their auto dealer bond by December 31 of each year.