What is a Washington Auto Dealer Bond?
Like nearly all other states, individuals or businesses selling or purchasing vehicles for a profit must have a valid license to do so in Washington. Auto dealers in Washington must also have a surety bond in order to maintain a license, known as a Washington auto dealer bond.
An auto dealer bond is a form of surety bond that is designed to offer some protection to the public and the state. It helps ensure the auto dealer will fulfill its obligations under state law and operate in compliance with current regulations. If an auto dealer fails to do so, a claim can be made against a Washington auto dealer bond.
Who Needs a Washington Auto Dealer Bond?
In Washington, it is illegal for anyone to sell, exchange, or purchase more than four vehicles per year for the purpose of making a profit. Individuals and businesses that do are required to have a license as an auto dealer and a corresponding auto dealer bond. New and used car dealers, truck dealers, and motor home dealers all qualify as auto dealers under the law.
Washington Auto Dealer Bond Obligee Details
A Washington auto dealer bond is a three-party agreement between the principal, the surety company, and the obligee. The principal of a bond is the auto dealer required to secure the bond, while the surety company is the party issuing the bond to the principal. The state licensing authority is known as the obligee of the bond.
The obligee for a Washington auto dealer bond is as follows:
State of Washington
Business Licensing Service
PO Box 9034
Olympia, Washington 98507
How Much Does a Washington Auto Dealer Bond Cost?
A $30,000 bond is required for all licensed auto dealers operating in the state of Washington. However, this is not the price paid to obtain an auto dealer bond. The surety company providing the bond to the auto dealer calculates what's known as a bond premium, or a percentage of the bond total. This bond premium ranges from 1 to 10% of the total bond amount for most Washington auto dealers, based on the financial standing of the dealer.
The surety company issuing a Washington auto dealer bond takes on some risk in doing so, given any successful claims are covered by the surety up to the bond limit. The auto dealer is then responsible for repaying claims. Because this is a form of credit extended to the auto dealer, checking credit history is a must for surety companies. Auto dealers that have lower credit will pay a higher bond premium for a Washington auto dealer bond.
How do You Get a Washington Auto Dealer Bond?
Auto dealers in Washington who need a bond can start the process by completing an online application. The surety company will need information on the amount of the bond requested, and some basic financial information to determine risk. After evaluating these details, a bond premium is quoted along with instructions for finalizing the process. A Washington auto dealer bond must be renewed once each year to remain in compliance with current laws.