What is a Tennessee Auto Dealer Bond?
Establishing a car dealership in Tennessee means taking specific steps to do so legally. The first is obtaining your auto dealer license which includes securing a Tennessee auto dealer bond. This requirement mandated by the state is meant to protect the customers you serve from fraudulent or illegal activities that may cause financial losses. If a customer of your dealership suffers damages because the business does not follow state laws, they have an opportunity to make a claim against a bond.
A Tennessee auto dealer bond is a type of surety bond where three parties are contractually connected. The surety is the company providing the bond, and your dealership is the principal. The obligee, which is the Tennessee Motor Vehicle Commission, is the party requiring the bond.
What Does a Tennessee Auto Dealer Bond Cost?
A Tennessee auto dealer bond of at least $50,000 is required for new and used car dealers, but you are not responsible for paying the full amount. Instead, you pay a percentage of the bond, typically ranging from 1 to 10%. The percentage rate you pay is based on your business financials to a degree, but most importantly, your personal credit.
Surety bonds are a form of credit extended to an auto dealership. The surety company pays for a bond claim initially, but the dealer is responsible for repaying that amount. If your personal credit score is low because of financial issues in the past or present, you are likely going to pay a higher rate for a Tennessee auto dealer bond.
How Do I Get a Tennessee Auto Dealer Bond?
Whether you have excellent or bad credit, getting a Tennessee auto dealer bond is a relatively easy task. You can start by submitting a brief online form to request a quote for your bond, and then complete an application in the same manner. After reviewing the application, the surety agency provides you with your bond price and the next steps for finalizing the bonding process.