What Is a North Dakota Auto Dealer Bond?
Many states require auto dealerships to get licensed prior to doing business with customers. One component of the licensing process is posting a North Dakota auto dealer bond for new and used car dealerships operating in the state.
A North Dakota auto dealer bond is a form of security against fraud for customers doing business with the dealership. It also ensures a licensed auto dealer complies with state regulations and industry standards.
How Does a North Dakota Auto Dealer Bond Work?
Similar to other surety bonds, a North Dakota auto dealer bond includes three parties.
The obligee, in this case, is the North Dakota Department of Transportation. This state agency requires the bond to be posted by the auto dealer.
The principal is required to obtain the bond so they can get licensed by the state.
The surety company provides the bond to the auto dealer. When a claim is made against a bond, the surety company pays the claim amount, but the principal is responsible for repaying any claims.
Obligee Information for North Dakota Auto Dealer Bonds
The North Dakota Department of Transportation has licensing authority to enforce regulations placed on auto dealers operating in the state. Through the Motor Vehicle Division of the department, auto dealers must submit initial licensing and bonding information as well as renewal details to ensure compliance with the law.
The obligee for North Dakota auto dealer bonds has the following contact information:
North Dakota Department of Transportation
Motor Vehicle Division
608 E Boulevard Avenue
Bismarck, North Dakota 58505
Are You Required to Get a North Dakota Auto Dealer Bond?
Under North Dakota state law, any person or entity that engages in selling, purchasing, exchanging, or advertising for the sale of motor vehicles is considered an auto dealer.
These business activities constitute the need for an auto dealer license and the appropriate North Dakota auto dealer bond. The definition of an auto dealer includes both new (franchised) and used auto dealers, trailer dealers, motor-powered recreational vehicle dealers, and mobile home dealers and manufacturers.
How Do I Get a North Dakota Auto Dealer Bond?
Securing a North Dakota auto dealer bond starts by submitting a brief online application. Your business details and personal credit are reviewed and the surety company then provides you with a quote for your auto dealer bond.
What Does a North Dakota Auto Dealer Bond Cost?
A North Dakota auto dealer bond of $25,000 is required for all new and used dealerships. However, an auto dealer is not required to pay the full bond amount.
Auto dealers pay a small percentage of the bond requirement, ranging from 1 to 10 percent of the total. The percentage you pay depends on your personal credit history and financial standing of your business.
Can I Get a North Dakota Auto Dealer Bond with Bad Credit?
Because the surety company extends payment for claims on your behalf, there is risk involved in providing an auto dealer bond. Dealers with bad credit pose a greater risk to the surety than dealers who have a higher credit score.
To offset increased risk, the surety company charges a higher percentage of the bond for auto dealers with bad credit.
Expiration Date and Renewal for a North Dakota Auto Dealer Bond
North Dakota auto dealer licenses expire December 31 each year. The North Dakota auto dealer bond that accompanies a valid license has the same expiration date and must be renewed on or before this date.
Auto dealers in North Dakota receive information from the surety company that issued the bond about the renewal process and the steps to follow to ensure timely renewal each year.