What is a Vermont Auto Dealer Bond?
Many types of businesses must follow strict guidelines under state law in order to operate legally. Auto dealers in Vermont are no exception to this rule, as they are required to hold a valid license as well as an auto dealer bond. A Vermont auto dealer bond is necessary because it offers some protection to both customers of the auto dealer and the state.
If an auto dealer in Vermont fails to meet its obligations under the law, a claim can be made against an auto dealer bond. Claims may result in compensation paid to the state or the consumer to cover financial losses. Vermont auto dealer bond claims can be costly to the auto dealer as they must be repaid over time.
Who Needs a Vermont Auto Dealer Bond?
An auto dealer in Vermont is anyone who engages in the business of selling or exchanging vehicles for profit. New and used auto dealers must have a license to do business, and a Vermont auto dealer bond is one aspect of obtaining a license.
Vermont Auto Dealer Bond Obligee Details
As a surety bond, a Vermont auto dealer bond brings together three parties under a legal agreement. The first is the auto dealer responsible for obtaining the bond, known as the principal. A surety company issues a bond to the principal, and the state's licensing agency tasked with overseeing auto dealers in the state is known as the obligee of the bond.
The obligee for auto dealers in Vermont is as follows:
Agency of Transportation
Department of Motor Vehicles
120 State Street
Montpelier, Vermont 05603
How Much Does a Vermont Auto Dealer Bond Cost?
Pricing of a Vermont auto dealer bond depends on a few different factors, the first of which is the amount of the bond. Under current state law, the bond amount required of an auto dealer depends on the number of vehicles sold per year. Dealers selling less than 25 vehicles need a $20,000 bond, and those that sell between 25 and 100 are required to have a $25,000 bond. Any dealer that sells between 101 and 250 vehicles needs a bond of $30,000, and those selling more than 250 must have a $35,000 bond. New auto dealers also need a $35,000 bond.
Fortunately, the bond amount is not the out-of-pocket cost paid by the auto dealer. Instead, the surety company providing the bond calculates the bond premium (cost) as a percentage of the bond total. The bond premium ranges from 1 to 10% for most auto dealers.
A check of personal credit is necessary as part of the bond pricing process, to determine how much risk an auto dealer represents to the surety company. Individuals or dealerships with less than ideal credit history will pay a higher bond premium than those who have a strong financial track record.
How do You Get a Vermont Auto Dealer Bond?
Obtaining a Vermont auto dealer bond begins by completing a brief online application. Auto dealers provide information on the bond amount and type, as well as financial details requested by the surety company. Once reviewed, auto dealers receive a bond quote and information on how to finalize the bonding process. A Vermont auto dealer bond must be renewed each year.