Have you heard about the auto dealer surety bond?
Well, not everyone is aware of this term. In a nutshell, the state government department for motor vehicles ensures that all the auto dealers adhere to the license terms.
The surety, or bond providing business, guarantees to pay any claims originating from the dealer’s failure to comply with his license, along with all costs and legal fees. Product misrepresentations, failure of the dealer to pay sales tax to the state, failure to provide the customer with a clear title, and other issues linked to the sale of autos can all lead to such claims.
The bond company will go to the principal to collect the money once the surety has paid the cost involved. Before an auto dealer can begin selling cars, he or she must first obtain a surety bond or sufficient money.
Let’s check out these six steps for applying an Auto Dealer Surety Bond:
Step 1. Find a surety bond company that operates in your state. Each state has its unique bonding regulations, and most surety bond businesses only operate in a specified geographic area.
Step 2. Fill out the bond application form. Initially, submit your basic information like your name, address, and phone number, as well as the sort of bond you require and the bond amount. Depending on the firm, you may also be required to agree to some basic terms of service.
Step 3. The information will take some time to get processed by the company. You can expect an initial quote from the company based on the general information you supply at this point, but they will need more information to provide you with a complete estimate.
Step 4. You should provide extra information to get a final price from the company. Leo’s Auto Insurance expects you to verify your credit rating because a surety bond is more like credit than insurance. So give them your company’s name, its net value, your social security number, and any other information they require. Because rates might vary significantly different bonding businesses, it’s a good idea to get specific quotes from several before deciding on one.
Step 5. Examine the quotes you’ve received and compare the pricing and terms of different companies. For example, some companies may refuse to bond you if you have bad credit. At the same time, others may issue the bond at a greater cost.
Step 6. Fill out the necessary papers for a surety bond with the company you’ve chosen. To finish the process, you’ll need to sign a notarized agreement of the terms, provide any final documents, and pay the bond amount.
Although each bond has its own set of legal requirements, the primary objective of a car dealer bond is to safeguard the public from any financial or legal harm caused by the vehicle dealer. A claim against the bond can be lodged if the auto dealer violates the bond’s terms, and the surety will payout. The dealer would then be legally accountable for reimbursing the surety company for the claim that had been paid. States take this bond so seriously that they will not issue a company license unless a surety bond accompanies it.
Hope this blog helps you in the smooth application of surety bond for your auto dealership business.