If you plan on opening a car dealership, there are various regulations you need to follow. Car dealers must comply with multiple federal, state, and local laws. One of these requirements is that a dealership must have a surety bond to protect consumers.
What is a Motor Vehicle Dealer Bond?
A motor vehicle dealer bond goes by many names including a used car dealer bond, an auto dealer bond or a DMV bond. All of these offer the same protection to consumers. It is meant to shield them against damages in the case of fraud, contract default or any other type of erroneous behavior by the car dealership or its employees.
Why do I Need a Motor Vehicle Dealer Bond?
If you or any of your employees commit fraud, even if it was unintentional, this bond will ensure the car buyer is protected from any of the damages or consequences that occur as a result of your actions. This bond is required by government agencies before a car dealer can get their license to sell cars.
In addition to meeting government requirement, the bond also helps consumers feel safe when purchasing a vehicle. This peace of mind may be enough to cause a buyer to purchase a vehicle without fear since they can resolve any disagreement with the bond company if they are not satisfied with the response taken by the dealer.
How do I get a Motor Vehicle Dealer Bond?
You can apply for a dealer bond through a surety bond company. The company will request financial documents in order to appraise the financial stability of the company. They may request a credit report in connection with your application. The main reason for gathering this information is to make sure your company can afford to pay the cost of the bond and that the company is secure.
If your company’s financial situation is not adequate or the credit score is poor, you may have difficulty obtaining a bond. In this case, you may need to find a surety bond company that has programs that can enable you to get a bond with bad credit or poor financials. You can contact one of these companies, like Bonds Express to get more information.
Where Should I Start?
Before you begin the process of opening a car dealership you should check with your state to determine the requirements you need to meet in order to open your business. Since each state has different rules and these rules can change at any time, it’s important to get the latest information.
Your state can tell you how much the bond needs to be for. The surety bond company will also need to know what type of vehicle you will sell and the type of license you will be issued by the state.
This information will ensure you get the appropriate bond to start your business. This knowledge will also help you when looking for a surety bond company to work with.