In this article, we’ll walk you through everything you need to get an Utah car dealer license.
Surety Bond Professionals is a family owned and operated bonding agency with over 30 years of experience. Our expert agents are ready to assist with all your Utah car dealer license bond needs.
What Are the Different Types of Utah Car Dealer Licenses?
Utah’s Motor Vehicle Enforcement Division (MVED) issues three main types of motor vehicle dealer licenses:
- New vehicle dealer license
- Used vehicle dealer license
- Motorcycle dealer license
The most common of these is a used vehicle dealer license, which is the focus of this article.
What Are the Steps in the Licensing Process?
Before you complete and submit your application for a vehicle dealer license, you’ll need to accomplish certain tasks including:
- Obtaining a Federal Employer Identification Number from the IRS
- Registering your dealership with the Utah State Tax Commission and obtaining a sales tax number
- Completing an 8-hour pre-licensing course offered by MVED or by an approved training vendor
- Securing a permanent business location
- Purchasing the required amount of liability insurance
- Purchasing Workers’ Compensation insurance to cover employees
- Purchasing a $75,000 Utah car dealer bond
Within 5-10 days of receiving your completed application, supporting documents, and payment of required license, fingerprint, and dealer plate fees, MVED will send someone out to inspect your dealership location.
Why Is a Utah Car Dealer Bond Required?
A Utah car dealer bond serves as a dealer’s pledge to abide by all applicable state laws and regulations. Utah requires the bond as protection against any financial loss by the state and/or the public stemming from the unlawful conduct of motor vehicle dealers. In the event of such a loss, the injured party can file a claim for damages against the dealer’s bond and be compensated.
How Are Utah Car Dealer Bond Claims Paid?
There are three parties to a Utah car dealer surety bond agreement—the “obligee,” the “principal,” and the “surety”—and the agreement is a legally binding contract among them. The obligee is the state of Utah, the principal is the dealer, and the surety is the company guaranteeing the payment of claims by the principal.
While the legal obligation to pay valid claims rests with the principal, the surety typically pays them initially and then is reimbursed by the principal. Failing to reimburse the surety can result in the surety taking legal action against the principal.
How Much Does a Utah Car Dealer Bond Cost?
The annual premium for a Utah car dealer bond is the product of multiplying the $75,000 required bond amount by the premium rate assigned to the principal at the time the bond is purchased. That premium rate is determined through the underwriting process, based largely on an assessment of the risk that the principal might not repay the surety for claims paid on behalf of the principal.
The best indicator of the level of risk involved is the principal’s personal credit score. The higher the principal’s credit score, the lower the risk, and therefore the lower the premium rate. With great credit, the premium rate could be as low as 1%, which would make the annual premium for a Utah car dealer bond only $750. With lesser credit, the premium rate could be as high as 3%.
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