What Is a Nebraska Auto Dealer Bond?
When an individual or business wants to sell motor vehicles in the state of Nebraska, it is likely operating as an auto dealer. Under current regulations, an auto dealer in Nebraska must hold a valid license to operate legally. One aspect of the licensing process involves obtaining a Nebraska auto dealer bond—a type of surety bond.
An auto dealer bond protects both the state and the buying public from business activities of auto dealers who do not comply with state laws. Should the licensed auto dealer fail to meet their obligations to the state or a customer, a claim can be made against a Nebraska auto dealer bond.
These claims can be costly for an auto dealer, so having a bond in place is designed to deter fraudulent or misleading business practices.
How Does a Nebraska Auto Dealer Bond Work?
A Nebraska auto dealer bond connects three different parties under a contract.
The first party is the state licensing authority responsible for overseeing auto dealers operating in Nebraska, known as the obligee of the bond.
The second party is the licensed auto dealer required to hold the bond, known as the principal of the bond.
Finally, the third party is the surety company that provides the bond to the auto dealer. The surety company also pays any claims made on the bond, although the auto dealer must pay back the surety company.
Nebraska Auto Dealer Bond Obligee Details
In Nebraska, the obligee of an auto dealer bond is as follows:
Nebraska Motor Vehicle Industry Licensing Board
Nebraska State Office Building
301 Centennial Mall South
Lincoln, Nebraska 68509
Who Needs a Nebraska Auto Dealer Bond?
Anyone who engages in the sale of motor vehicles is an auto dealer in Nebraska, and must have a valid license and an auto dealer bond. New and used auto dealers, as well as trailer dealers and motorcycle dealers, are required to maintain a bond for as long as they plan to be in the auto dealer industry.
How Do You Get a Nebraska Auto Dealer Bond?
Auto dealers in Nebraska can start the process of obtaining a bond by filling out a short application online. The surety company reviews the application details, including the bond amount and financials of the individual or dealership, and provides a bond quote.
Once the bond is paid for, information is sent to the obligee of the bond to finalize the process.
How Much Does a Nebraska Auto Dealer Bond Cost?
All auto dealers in Nebraska must have a bond of $50,000 to comply with current regulations, but this is not the price paid for a Nebraska auto dealer bond. The surety company prices a bond as a percentage of the total bond amount based on the financial details and credit history of the dealer.
A Nebraska auto dealer bond is a form of credit extended to the auto dealer. When claims are successful, the surety company pays the claim amount up to the limit of the bond, but the auto dealer is ultimately responsible for repaying these amounts.
For this reason, credit history and financial stability of the dealer are crucial in pricing the bond. For most Nebraska auto dealers, the price of a bond ranges from one to 10 percent of the bond total.
Can I Get a Nebraska Auto Dealer Bond with Bad Credit?
Auto dealers with strong credit and stable financials are likely to pay a lower percentage than those with bad credit. While it is possible to obtain a Nebraska auto dealer bond with bad credit, you should expect to pay a higher percentage of the total bond amount.
How Do I Renew My Nebraska Auto Dealer Bond?
Nebraska auto dealer bonds must be renewed by December 31 of each year to ensure ongoing compliance with state law. It is up to you to submit your renewal before the new year to ensure your bond remains valid. If you have an invalid bond, you are operating your business illegally.