California Auto Dealer Bonds

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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 California auto dealer bond needs.

What Are They?

An auto dealer bond is a type of license and permit bond that allows you to operate a motor vehicle dealership in the state of California. The California Department of Motor Vehicles requires auto dealers to be bonded as a way to protect consumers from the financial harm that can result from a dealer’s unlawful or unethical business practices.

Who Needs Them?

California categorizes motor vehicle dealers as:

  • General motor vehicle dealers, which sell new or used cars and trucks
  • Lessor-retailers, which sell previously leased or rented vehicles
  • Wholesalers, which sell vehicles only to other licensed dealers
  • Motorcycle and ATV motor vehicle dealers

For bonding purposes, general motor vehicle dealers are in a class by themselves, requiring them to purchase a $50,000 auto dealer surety bond. Lessor-retailer, wholesalers, and motorcycle/ATV dealers all must purchase a $10,000 bond.

In all cases, purchasing the appropriate California auto dealer surety bond is a prerequisite for obtaining or renewing a license to operate within the state.

Speak with a Surety Bond Professionals agent today to discuss your bonding needs.

How Do They Work?

There are three parties to every California auto dealer bond:

  • The California Department of Motor Vehicles is the “obligee,” the party requiring the bond
  • The auto dealer is the “principal” required to purchase the bond
  • The company that underwrites and issues the bond is the “surety”

Any failure to abide by the California Vehicle Code that causes a consumer to incur a financial loss can result in a claim being filed against the auto dealer bond. Common examples of infractions include:

  • Misrepresentation of a vehicle’s condition
  • Failure to pay or a trade-in vehicle
  • Failure to honor a warranty

When a claim is filed and determined by the surety to be valid, the surety will go ahead and pay it, even though the terms of the surety bond agreement make the principal legally responsible for all claims. By paying a claim on the principal’s behalf, the surety is extending a short-term line of credit, which the principal is legally obligated to repay.

What Do They Cost?

The annual premium cost for a California auto dealer bond is a small percentage of the required $10,000 or $50,000 bond amount. That percentage, the premium rate, is established by the surety on a case-by-case basis. The surety’s primary concern is being reimbursed for claims paid on behalf of the principal, so the main factor considered in setting the premium rate is the principal’s personal credit history.

A principal with a high credit score presents a lower risk to the surety and is accordingly assigned a low premium rate, in the range of 1% to 3%. A principal with poor credit will pay a higher premium rate.

Get a Quote

At Surety Bond Professionals, we will get you the California auto dealer bond you need at a competitive rate.