Alabama Car Dealer License Guide

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Surety Bond Professionals is a family owned and operated bonding agency with over 30 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your Alabama car dealer license bond needs. Learn how to get an Alabama car dealer license, and contact us today to request a quote on the bond you need.

What Are the Different Types of Alabama Car Dealer Licenses?

The Alabama Department of Revenue (ADOR) issues four different types of car dealer licenses for

  • Retailers
  • Wholesalers
  • Rebuilders
  • Reconditioners

All Alabama car dealer licenses must be renewed as of October 1 of each year, regardless of when it is issued.

What Are the Steps in the Licensing Process?

All car dealer licenses require completion of an online application. Retail dealers must first obtain a sales tax number through ADOR.

When you’ve finished making the required entries in the license application, a transmittal sheet will be displayed, listing all of the supporting documents you must mail to ADOR. These include documentation related to your business location, proof of liability insurance, and a car dealer bond for a minimum of $50,000.

Once you obtain your regulatory license as an Alabama auto dealer, you’ll be able to apply for the privilege license that every Alabama business owner needs from their county probate office.

Why is an Alabama Car Dealer Bond Required?

An Alabama car dealer bond is a type of license and permit surety bond. It serves multiple purposes:

  • It guarantees that car dealers operate in compliance with all laws governing the sale of motor vehicles in Alabama.
  • It provides a way for ADOR to collect unpaid taxes and fees owed by dealers.
  • It protects ADOR against liability for damages suffered by the public due to the unlawful or unethical business practices of car dealers.
  • It provides a source of funds for compensating consumers who incur a financial loss due to such unlawful or unethical dealer actions.

There must be a valid Alabama car dealer bond in force at all times in order to avoid suspension or revocation of the dealer’s license.

How Are Alabama Car Dealer Bond Claims Paid?

An Alabama car dealer bond is a legally binding contract among an “obligee” (ADOR), a “principal” (the dealership owner), and a “surety” (the company that guarantees the payment of claims). The terms of the bond make the principal solely responsible for paying valid claims up to the required $50,000 bond amount, also known as the bond’s “penal sum.”

When a claim is filed, the surety will first determine whether it is valid and may try to negotiate a favorable settlement. But if the claim must be paid, and the principal doesn’t pay it promptly, the surety will go ahead and pay it, creating a debt that the principal must repay to the surety. The surety has the right to take legal action against the principal to obtain repayment if necessary.

How Much Does an Alabama Car Dealer Bond Cost?

Alabama car dealer bonds are subject to underwriting to establish the appropriate premium rate. The surety is taking a risk in paying claims on behalf of a principal and waiting to be repaid. Therefore, the underwriters’ primary consideration is the principal’s creditworthiness.

A high personal credit score suggests that the risk of not being repaid on schedule by the principal is low, resulting in a low premium rate, potentially as low as one percent. The converse is true as well, so a principal with a low credit score will pay a higher premium rate.

Our surety bond professionals will get you the Alabama car dealer bond you need at a competitive rate.