Colorado 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 your Colorado auto dealer bond needs.

What Are They?

Colorado auto dealer bonds are a type of license and permit bond because they are a prerequisite for getting and keeping a license to operate as a motor vehicle dealer anywhere in the state. Auto dealer licenses are issued by the Colorado Department of Revenue, Motor Vehicle Dealer Board.

A Colorado auto dealer bond guarantees that the dealer will operate in compliance with all applicable state laws and regulations. It also guarantees the availability of funds to compensate the state and consumers for financial losses caused by a dealer’s violation of the terms of their license.

Who Needs Them?

Both retail and wholesale auto dealers must purchase a $50,000 Colorado auto dealer bond when applying for a new dealer license or renewing an expiring one. Dealers must also provide a $15,000 salesperson bond for each salesperson they employ.

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

How Do They Work?

Every surety bond agreement is a legally binding contract between three parties known as the obligee, the principal, and the surety. For a Colorado auto dealer bond, these are as follows:

  • The Colorado Department of Revenue is the “obligee” requiring the bond.
  • The auto dealer is the “principal” required to purchase the bond.
  • The surety bond company is the “surety” underwriting and approving the bond.

The obligee can file a claim against an auto dealer bond to recover required taxes and fees the principal has failed to remit. And auto buyers can submit claims for financial damages resulting from infractions such as failing to disclose prior accidents and repairs, falsifying odometer readings, not providing proper certificates of title, and so on.

When the surety determines that a claim is valid, it will be approved for payment. Although paying claims is the legal responsibility of the principal, the surety will usually pay a claim on behalf of the principal. In doing so, the surety is extending credit to the principal, creating a debt that the principal must then repay to the surety. The claimant receives prompt payment, and the principal can repay the surety in installments over a certain period of time.

What Do They Cost?

The annual premium for a Colorado auto dealer bond is a small percentage of the $50,000 required bond amount (the bond’s penal sum). The premium rate is established through the surety’s underwriting process.

The surety’s main concerns are the likelihood of claims and the creditworthiness of the principal. The underwriters will take into account the principal’s personal credit score, industry experience, type of license, history of claims, and financial strength. A well-qualified principal usually will pay a premium rate in the range of 1% to 2%. A principal with lesser credit should still be able to get bonded but will pay a higher premium.

Get a Quote

Our surety bond professionals will get you the Colorado auto dealer bond you need at a competitive rate.