What is a South Dakota Auto Dealer Bond?
In South Dakota, auto dealers must follow specific rules in order to operate a business legally. One of the criteria for meeting licensing requirements is obtaining a South Dakota auto dealer bond. This type of surety bond provides a safeguard to both customers who do business with the dealer and the state.
Should an auto dealer in South Dakota fail to meet its obligations under licensing regulations, such as provide misleading information or engage in fraudulent business practices, a claim can be made against the auto dealer's bond. Claims can be a costly issue for auto dealers, because although the surety company providing the bond pays the claim amount up front, the auto dealer is ultimately responsible for paying the amount back.
Who Needs a South Dakota Auto Dealer Bond?
There are several categories of auto dealers under South Dakota law. New and used auto dealers must have a license, as must mobile home dealers, boat dealers, trailer dealers, and motorcycle or snowmobile dealers. Each category of dealer is also required to secure a South Dakota auto dealer bond.
South Dakota Auto Dealer Bond Obligee Details
A South Dakota auto dealer bond works like any other surety bond in that it brings together three distinct parties under a contract. The auto dealer required to have the bond is known as the principal. The surety company provides the bond to the principal. The state's licensing agency requiring a bond to be in place is known as the obligee of the bond.
The obligee for South Dakota auto dealer bonds is as follows:
South Dakota Department of Revenue
445 East Capitol Avenue
Pierre, South Dakota 57501
How Much Does a South Dakota Auto Dealer Bond Cost?
Obtaining your South Dakota auto dealer bond is a cost of doing business, but in most cases, the price an auto dealer pays is minimal. The surety company providing an auto dealer bond considers both the total amount of the bond required and the financial track record and personal credit history of the auto dealer.
First, the amount of the bond needed varies depending on the category into which the auto dealer falls. For instance, new and used auto dealers must have a bond of $25,000. A trailer dealer needs a bond of $10,000, while a snowmobile or motorcycle dealer needs a $5,000 bond. However, the bond amount is not the same as the price an auto dealer pays for a bond.
Because the surety company takes on some risk in issuing a bond, a check of personal credit is necessary to determine pricing. Typically, South Dakota auto dealer bonds cost 1 to 10% of the bond amount based on financial history. A lower credit score or past issues with credit results in a higher bond price.
How do You Get a South Dakota Auto Dealer Bond?
Auto dealers in South Dakota may start the process of getting a bond by submitting a short online application. The surety company will need details on the type of bond requested, the amount, and the financial history of the applicant. After these details are reviewed, a bond quote is provided along with instructions on how to finalize the process. A South Dakota auto dealer bond must be renewed each year.