What is a Delaware Auto Dealer Bond?
Auto dealers in many states must become licensed to operate a business, and Delaware is no exception. During the licensing process, auto dealers in Delaware must secure a Delaware auto dealer bond. This type of surety bond is a safeguard to the public when doing business with a licensed auto dealer.
If the purchase or sale of a vehicle is fraudulent or misleading to the consumer, then a claim can be made against a Delaware auto dealer bond. In a successful claim, the party that incurs financial loss in the transaction receives compensation for their damages and the dealership repays the claim amount over time.
How Does a Delaware Auto Dealer Bond Work?
A Delaware auto dealer bond brings together three different parties under a contract.
The licensed auto dealer required to obtain a bond is known as the principal.
The surety company is the party that provides the bond to the principal.
The state licensing authority responsible for overseeing and enforcing laws pertaining to auto dealers is the obligee of the bond.
Delaware Auto Dealer Bond Obligee Details
The obligee for Delaware auto dealer bonds is the Delaware Division of Revenue. The Delaware Division of Revenue requires auto dealers to obtain auto dealer bonds to ensure that all auto dealers abide by state and local laws.
Delaware Division of Revenue
Division of Motor Vehicles
303 Transportation Circle
Dover, Delaware 19903
Who Needs a Delaware Auto Dealer Bond?
In Delaware, any individual or business that engages in the act of selling vehicles likely needs an auto dealer bond. The requirement extends to those who sell more than five vehicles per year, as either a used or new vehicle dealership.
How do You Get a Delaware Auto Dealer Bond?
Auto dealers in Delaware can start the process of obtaining an auto dealer bond by submitting a simple online application. The surety company reviews the bond type and provides a quote.
Once a review of the auto dealer's financial health is complete, a bond quote is provided. The auto dealer then pays the premium. Delaware auto dealer bonds expire December 31 of each year and must be renewed to stay compliant with state law.
How Much Does a Delaware Auto Dealer Bond Cost?
As with other surety bonds, the price an auto dealer pays for a Delaware auto dealer bond varies. The surety company providing the bond first looks at the amount of the bond to determine the cost, along with the financial history of the auto dealer.
In Delaware, all auto dealers must have an auto dealer bond of no less than $25,000, but this does not represent the price an auto dealer pays for putting the bond in place. The surety company evaluates an auto dealer's financial track record and credit history to calculate the bond premium, which is the amount you pay out of the pocket.
The bond premium is a percentage of the total bond, typically ranging from 1 to 10%. Auto dealers who do not have a strong financial history are likely to pay more for a Delaware auto dealer bond because the surety company is taking on greater risk in providing the bond.
Can I Get a Delaware Auto Dealer Bond with Bad Credit?
Getting an auto dealer bond in Delaware with bad credit is more difficult because a poor credit history poses a greater risk to the surety company providing the bond to you; however, it is not impossible.
Once the surety company evaluates your financial health, they’ll determine the percentage of the bond you’ll pay. Bad credit may simply increase your percentage rate.
How Do I Renew my Delaware Auto Dealer Bond?
Delaware auto dealer bonds expire on December 31 of each year, but you can request a renewal application form from the Department of Motor Vehicles 90 days before your expiration date. This gives you plenty of time to renew your auto dealer bond before the new year begins.