California Auto Dealer Bond
We've all heard stories of sneaky, shifty auto dealers looking to take advantage of unsuspecting customers. The nationwide implementation of surety bonds within the automotive industry has helped limit such instances of deception. The California Department of Motor Vehicles has established surety bond standards to monitor and regulate work done by the state's auto dealers.
California Auto Dealer Bond Basics
California auto dealer bonds work as three-party agreements like other surety bonds. In this case, the three parties include:
- Principal: The dealer who purchases the bond in order to get a license, thus guaranteeing the quality of his future performance.
- Obligee: The Department of Motor Vehicles, which requires the dealer to purchase a bond to ensure appropriate professional behavior.
- Surety: The agency (like SuretyBonds.com) who issues the bond to the principal, thus offering a financial guarantee of the dealer's performance.
California Vehicle Code Section 1171 C forbids the dealer from committing fraud or making any fraudulent representations that could result in financial loss for a purchaser, seller, financing agency, or governmental agency. If a bonded motor vehicle dealer damages consumers or a government agency, the harmed party has a right to take action against the bond in an amount that can't exceed the face value of the bond. If a court finds a dealer, remanufacturer, or surety liable for certain actions protected by the bond, the professional's license will automatically be suspended. The license can only be reinstated if the bond is reinstated, or if a new bond is purchased.
California Auto Dealer Bond Regulations
Securing an auto dealer bond is essential for anybody looking to get a California auto dealer license. Any individual applying for an auto dealer or remanufacturer's license in California has to purchase the bond before being issued a license. Once executed, a California auto dealer bond will remain in effect throughout the duration of the license. Likewise the bond will need to be renewed along with the license.
California Vehicle Code Section 1171 outlines three major bond types for California auto dealers:
- Surety Bond of Dealer (OL 25): $50,000
- Surety Bond of Vehicle Remanufacturer (OL 25A): $50,000
- Surety Bond of Motorcycle Dealer, Motorcycle Lessor-Retailer, All Terrain Vehicle Dealer, or Wholesale-Only Dealer [less than 25 vehicles per year] (OL 25B): $10,000
California Auto Dealer Bond Costs
New California auto dealers with good credit should expect to pay about a 2% premium, which would be around $1,000 for the $50,000 bond. SuretyBonds.com offers experienced auto dealers reduced rates as low as $575 on the same bond. Applicants looking to purchase form OL 25B for $10,000 usually only need to pay 1% of the bond amount—or $100—to purchase their bond. Dealers with bad credit should be prepared to pay fees that could cost anywhere between 10 and 20% of the bond amount, which could mean a $5,000 to $10,000 premium for the $50,000 bond. SuretyBonds.com works to get every applicant a competitive rate for a California auto dealer bond.
Get a California Auto Dealer Bond
Once you apply for the California auto dealer bond online, a surety specialist will contact you in regard to your application and potential bond premium. After completing a thorough financial check, the surety will offer you the most competitive rate possible. Once the surety approves a principal's application and receives payment, the surety executes the bond and administers it to the dealer.
