In this article, we’ll walk you through everything you need to get a Vermont 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 Vermont car dealer license bond needs.
What Are the Different Types of Vermont Vehicle Dealer Licenses?
Vermont’s Division of Motor Vehicles (DMV) issues different types of licenses for dealers selling different types of vehicles, from new or used cars to motorboats, farm equipment, and highway building equipment.
This article focuses on what’s involved in getting licensed as a used car dealer.
What Are the Steps in the Licensing Process?
Before you can complete your license application, you’ll need to:
- Register your dealership with the IRS and obtain a Federal Employer Identification Number (FEIN)
- Use the state’s online Business Services Center to register your dealership with Vermont’s Secretary of State, the Department of Taxes, and the Department of Labor
- Establish a permanent business location and obtain zoning approval
- Obtain a local business permit if required in the area where your dealership will be located
- Obtain a criminal background check from the Vermont Crime Information Center
- Purchase liability insurance and Workers’ Compensation insurance (if you will have employees)
- Purchase a Vermont car dealer bond; the required bond amount for first-time applicants is $35,000
You’ll need to gather all required supporting documents and submit them with your completed application and payment of the license fee (currently $503 for a one-year license).
Why is a Vermont Car Dealer Bond Required?
When you purchase a Vermont car dealer bond, you are guaranteeing that you will operate your dealership in accordance with all applicable state laws and regulations. The bond is intended to protect both the state and consumers against any financial harm caused by a dealer’s violation of those laws and regulations. It obligates you, the “principal” in the surety bond agreement, to pay all valid claims for damages and indemnifies the state against any liability for such damages.
How Are Vermont Car Dealer Bond Claims Paid?
The surety bond agreement for a Vermont car dealer bond also involves two other parties: the obligee (the state of Vermont) requiring the bond and the surety (the company guaranteeing the payment of claims). As the guarantor, the surety typically will pay a legitimate claim on behalf of the principal and then be repaid by the principal. If the principal does not repay the debt to the surety, the surety has the right to take legal action against the principal to secure reimbursement.
How Much Does a Vermont Car Dealer Bond Cost?
Like most surety bonds, Vermont car dealer bonds are sold for an annual premium that is a small percentage of the required bond amount. That percentage is the premium rate, and it’s established by the surety based on an underwriting assessment of the risk the surety will be taking on in paying claims on behalf of the principal.
That risk is determined by considering the principal’s credit history, particularly the principal’s personal credit score, which rates how responsible the principal has been about repaying debts in the past. A high credit score suggests that there is a low risk that the principal won’t repay the surety as agreed, which means that the premium rate will also be low. Conversely, a low credit score indicates higher risk and warrants a higher premium rate.
A principal with excellent credit typically will be assigned a premium rate as low as 1%, or perhaps even a bit lower, while a credit-challenged applicant will pay a much higher premium rate—perhaps in the 3% range or higher.
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