Opening and maintaining an auto dealership means you’ll need to look into requirements for surety bonds. These requirements vary by state, and are not overly-costly to comply with. But they are very much required for running your business.
Truth be told – tt’s a tight bond market for auto dealers, but qualified business owners can still find competitive rates.
Auto Dealer Bonds are among the most common commercial surety bonds on the market. These surety bonds help protect states and consumers against auto dealers, ensuring they operate according to state laws and regulations. These bonds are required in order for a dealer to obtain a license. There are several names for auto dealer bonds, including MVD bonds, DMV bonds, user car dealer bonds or simply auto dealer bonds.
The MVD bond market has seized a bit during the last 18 months, given the hardened credit market and lingering recession. But there are encouraging signs that the economy is beginning to thaw. Auto sales increased in July to 11.2 million from 9.7 million the month before, thanks in large part to the government’s “cash for clunkers” program.
Missouri dealers must obtain a $25,000 corporate surety bond. The state Motor Vehicle Bureau acts as the obligee. Despite the softening economic landscape, dealers with poor credit or a history of bankruptcy or liens may still struggle to obtain a surety bond.
Dealers with less than sterling credit will likely face higher premiums, as sureties often consider MVD bonds more high risk than others commercial bonds. Sureties process an exorbitant number of auto dealer bonds every year, which helps keep bond rates competitive.
The process for obtaining MVD bonds is similar to other surety bonds. Surety companies will examine the past practices, financial health, management structure and other company aspects before deciding whether to issue an auto dealer bond.
There are also a handful of states that require bonds for mobile home dealers.
Inquire with your insurance company, or visit SuretyBonds.com to get a quote on your auto dealer bond today.