Louisiana Auto Dealer Bond

In order to operate a legal car dealership in Louisiana, obtaining a valid license is a necessary part of the process. Louisiana auto dealers must also have an auto dealer bond to comply with state regulations. An auto dealer bond is not insurance for the business, but instead, it is a type of Louisiana surety bond meant to safeguard the customers and the state from misleading business practices or fraud when doing business with a licensed auto dealer.

A Louisiana auto dealer bond allows a customer or the state to file a claim against an auto dealer who fails to conduct business in line with current laws. Claims may result in compensation paid to the party harmed in the transaction to cover any financial losses incurred because of the auto dealer.

Like many other states, auto dealers are individuals or businesses that engage in the practice of selling or buying vehicles for profit. Louisiana auto dealers encompass those who buy or sell used vehicles or new vehicles, franchise dealerships, or motor vehicle facilities. Each category of dealership is required to have a Louisiana auto dealer bond in place.

A Louisiana auto dealer bond involves three different parties. The first is the licensed auto dealer required to hold a bond, known as the principal. The second is the surety company providing the bond to the auto dealer, and the third is the licensing authority mandating that a bond is in place, known as the obligee. The obligee for any Louisiana auto dealer bond is as follows:

Louisiana Motor Vehicles Commission

3132 Valley Creek Drive

Baton Rouge, Louisiana 70808

Phone: 225-925-3870

The cost of a Louisiana auto dealer bond depends on several factors, the first of which is the amount of the bond required by the state. The bond amount an auto dealer must have in place is based on the type of dealership. Used motor vehicle dealers need a bond of $50,000, while franchise or new auto dealers must have a $20,000 bond. Specialty auto dealers are required to have a $20,000 as well, while new or used motor vehicle facilities are required to have a $10,000 bond.

However, auto dealers do not pay this amount for their Louisiana auto dealer bond. Instead, the surety company providing the bond calculates a bond premium based on the amount and the financial details of the business. Credit history is taking into account to determine the risk an auto dealer poses to the surety company. If credit has been an issue in the past, the bond cost, known as the bond premium, is higher. The surety company prices Louisiana auto dealer bonds as a percentage of the bond amount, typically ranging from 1 to 10%.

Licensed auto dealers in need of a Louisiana auto dealer bond can begin the process of obtaining a bond by submitting a brief application online. The surety company reviews the bond amount requested as well as the credit history of the auto dealer and provides the bond price. Once the bond premium is paid, the auto dealer bond is in place until it expires. Louisiana auto dealer bonds expire on December 31 each year and must be renewed to stay compliant with the law.