What is a Washington Auto Dealer Bond?
Individuals or businesses selling or purchasing vehicles for a profit must have a valid license to do so in Washington. Auto dealers in Washington must also have a Washington auto dealer bond to maintain a license, which is a type of surety bond.
An auto dealer bond is a form of surety bond that is designed to offer some protection to the public and the state. It ensures the auto dealer will fulfill their obligations under state law and will operate in compliance with current regulations. If an auto dealer fails to do so, then a claim can be made against a Washington auto dealer bond.
How Does a Washington Auto Dealer Bond Work?
An auto dealer bond is an agreement made between three separate parties. All three parties benefit from the agreement in some way.
The obligee is the state agency that requires the auto dealer to obtain the bond. In this case, the obligee is the State of Washington.
The principal of a bond is the auto dealer required to secure the bond. Dealers must get the bond so they can legally run their business and protect their customers in the event that a financial mishap occurs.
The surety company is the party issuing the bond to the principal. The surety pays the claim if a customer files one, but the principal will repay the surety over time.
Washington Auto Dealer Bond Obligee Details
The obligee for a Washington auto dealer bond is as follows:
State of Washington
Business Licensing Service
PO Box 9034
Olympia, Washington 98507
Who Needs a Washington Auto Dealer Bond?
In Washington, it is illegal for anyone to sell, exchange, or purchase more than four vehicles per year for the purpose of making a profit. Individuals and businesses that do so are required to have a license as an auto dealer and a corresponding auto dealer bond.
New and used car dealers, truck dealers, and motor home dealers all qualify as auto dealers under the law.
How do You Get a Washington Auto Dealer Bond?
Auto dealers in Washington who need a bond can start the process by completing an online application. The surety company will need information on the amount of the bond requested and some basic financial information to determine risk.
After evaluating these details, a bond premium is quoted along with instructions for finalizing the process. A Washington auto dealer bond must be renewed once each year to remain in compliance with current laws.
How Much Does a Washington Auto Dealer Bond Cost?
A $30,000 bond is required for all licensed auto dealers operating in the state of Washington, but this is not the price paid to obtain an auto dealer bond. The surety company providing the bond to the auto dealer calculates a bond premium, or a percentage of the bond total.
The bond premium ranges from 1 to 10% of the total bond amount for most Washington auto dealers based on the financial standing of the dealer.
Can I Get a Washington Auto Dealer Bond with Bad Credit?
The surety company issuing a Washington auto dealer bond takes on some amount of risk when offering bonds to auto dealers, because any successful claims are covered by the surety up to the bond limit. The auto dealer is then responsible for repaying claims.
Because a bond is a form of credit extended to the auto dealer, checking credit history is a must for surety companies. Auto dealers that have lower credit will pay a higher bond premium for a Washington auto dealer bond.
How Do I Renew My Washington Auto Dealer Bond?
You must renew your Washington auto dealer bond every year, but the process is simple. Each year before your auto dealer bond expires, you’ll receive a renewal notice well in advance of your auto dealer bond’s expiration date. As long as you send in your renewal application before your bond expires, then you’ll be set for the next year.