What is a New Jersey Auto Dealer Bond?
A requirement for obtaining a license as an auto dealer in New Jersey is securing a New Jersey auto dealer bond. As a type of surety bond, a New Jersey auto dealer bond safeguards customers from fraudulent or illegal practices when doing business with a dealership. A claim can be made against a bond if a customer experiences financial damages, up to the amount of the bond in place.
A New Jersey auto dealer bond is a three-party contract connecting the principal required to post the bond, the surety company providing the bond, and the obligee, the New Jersey Motor Vehicle Commission, that requires the bond.
Who Needs a New Jersey Auto Dealer Bond?
Several different types of auto dealer licenses are available in New Jersey, all which require individuals or business owners to secure a New Jersey auto dealer bond. The most common licenses include the following:
- New auto dealer
- Used auto dealer
- New and used auto dealer
- Boat dealer
- Leasing dealer
New Jersey Auto Dealer Bond Obligee Information
Auto dealers operating their business in the state of New Jersey must abide by the regulations set forth under New Jersey laws. Licensing requirements include securing a New Jersey auto dealer bond at the same time a license is initially submitted or renewed. The obligee of New Jersey auto dealer bonds is the New Jersey Motor Vehicle Commission, with the following contact information:
New Jersey Motor Vehicle Commission
Business Licensing Services Bureau
255 East State Street
Trenton, New Jersey 08666
What Does a New Jersey Auto Dealer Bond Cost?
A surety bond functions like a line of credit to a licensed auto dealer. When a claim is found to be legitimate, the surety company pays the claim amount. However, the dealership is responsible for repaying the claim. This structure means that personal credit plays a major role in determining the price of a bond. Auto dealers with a low credit score or a negative credit history pay higher for a New Jersey auto dealer bond than dealers who have a healthy credit history.
In New Jersey, an auto dealer bond of at least $10,000 is required as part of obtaining a dealer bond. The surety company calculates the price you pay as a percentage of the total bond amount, ranging from 1 to 3% for dealers with strong credit. A New Jersey auto dealer bond for someone with a lower credit score can cost between 5 and 10% of the bond total.
How Do I Get a New Jersey Auto Dealer Bond?
You can submit a short online form to get a New Jersey auto dealer bond, providing details of your business and your personal credit history. The surety company reviews this information and gives you a quote for the bond along with how to complete the bonding process.
Renewal and Expiration Date for New Jersey Auto Dealer Bonds
New Jersey auto dealer bonds have the same expiration date as auto dealer licenses. Each license expires on March 31, every year, and it must be renewed in order to stay compliant with state regulations. Surety bonds issued to New Jersey auto dealers are renewed at the same time, and the surety company provides information and instruction on how to complete the renewal process.