What Is a South Dakota Auto Dealer Bond?
Auto dealers in South Dakota must follow specific rules to operate a business legally. One of the criteria for meeting licensing requirements is obtaining a South Dakota auto dealer bond. This type of surety bond provides a safeguard to both customers who do business with the dealer and the state.
Should an auto dealer in South Dakota fail to meet its obligations under licensing regulations, such as provide misleading information or engage in fraudulent business practices, a claim can be made against the auto dealer's bond.
Claims can be costly for auto dealers, because although the surety company providing the bond pays the claim amount up front, the auto dealer is ultimately responsible for paying the amount back.
How Does a South Dakota Auto Dealer Bond Work?
A South Dakota auto dealer bond works like any other surety bond in that it brings together three distinct parties under a contract.
The state's licensing agency requiring a bond to be in place is known as the obligee of the bond.
The auto dealer required to have the bond is known as the principal.
The surety company provides the bond to the principal and initially pays successful claims on the bond.
South Dakota Auto Dealer Bond Obligee Details
The obligee for South Dakota auto dealer bonds is as follows:
South Dakota Department of Revenue
445 East Capitol Avenue
Pierre, South Dakota 57501
Who Needs a South Dakota Auto Dealer Bond?
There are several categories of auto dealers under South Dakota law. New and used auto dealers must have a license, and so do mobile home dealers, boat dealers, trailer dealers, and motorcycle or snowmobile dealers. Each category of dealer is also required to secure a South Dakota auto dealer bond.
How Do You Get a South Dakota Auto Dealer Bond?
Auto dealers in South Dakota may start the process of getting a bond by submitting a short online application. The surety company will need details on the type of bond requested, the amount of bond needed, and the financial history of the applicant.
After these details are reviewed, a bond quote is provided along with instructions on how to finalize the process.
How Much Does a South Dakota Auto Dealer Bond Cost?
Obtaining your South Dakota auto dealer bond is a cost of doing business, but in most cases, the price an auto dealer pays is minimal. The surety company providing an auto dealer bond considers both the total amount of the bond required and the financial track record and personal credit history of the auto dealer.
The amount of the bond needed varies depending on the category into which the auto dealer falls. For example, new and used auto dealers must have a bond of $25,000, a trailer dealer needs a bond of $10,000, and a snowmobile or motorcycle dealer needs a $5,000 bond.
The bond amount is not the same as the price an auto dealer pays for a bond. Because the surety company takes on some risk in issuing a bond, a check of personal credit is necessary to determine pricing.
Can I Get a South Dakota Auto Dealer Bond with Bad Credit?
South Dakota auto dealer bonds cost between 1 and 10 percent of the bond amount based on financial history. You can get an auto dealer bond with bad credit, but a lower credit score or past credit issues will result in a higher bond price.
How Do I Renew My South Dakota Auto Dealer Bond?
A South Dakota auto dealer bond must be renewed each year. You will receive renewal reminders to ensure you keep a valid bond, because failing to renew your bond can be a big hassle for your business.