Alabama Auto Dealer Bond

Learn everything you need to know about Alabama auto dealer bonds, and get bonded today with Surety Bond Professionals.

What Are They?

The state of Alabama requires motor vehicle dealers to provide a $25,000 surety bond as a guarantee that they will conduct their business in accordance with all applicable state laws. Any violation of the terms of the surety bond agreement may result in a claim being filed against the bond.

The $25,000 bond amount ensures that funds will be available to compensate any claimant who has incurred a financial loss as a result of the auto dealer’s unlawful or unethical actions.

Quick Facts

Here’s a quick look at the most important information about Alabama motor vehicle dealer bonds:

  • Required Bond Amount: $25,000
  • Premium: $200 minimum
  • Effective Date: Oct 1
  • End Date: Sept 30 of next year

Who Needs Them?

Anyone applying for licensure in Alabama as a new or used motor vehicle dealer (including motorcycle and trailer dealers) or as a wholesaler or rebuilder must obtain an Alabama auto dealer bond as part of the licensing process. Anyone who sells five or more vehicles within a 12-month calendar year is considered to be a motor vehicle dealer and is subject to the bonding requirement.

You must have a valid bond in force at all times to avoid having your auto dealer’s license revoked.

How Do They Work?

The surety bond agreement is a legally binding agreement involving three parties:

  • The state of Alabama, specifically the Alabama Department of Revenue, Motor Vehicle Division, is the “obligee” requiring the bond.
  • The motor vehicle dealer is the “principal” required to purchase the bonds.
  • The company underwriting and issuing the bond is the “surety.”

Each party has specific roles and responsibilities under the terms of the surety bond agreement. The bond agreement spells out what would constitute a violation and makes the principal solely responsible for paying claims.

However, when a claim is filed against the bond, and the surety determines that the claim is valid, the principal may not be able to pay it immediately. As a courtesy in such instances, the surety will typically pay the claim initially and then be reimbursed by the principal. An indemnification clause in the surety bond agreement relieves the surety of any legal responsibility for claims and obligates the principal to repay the surety.

What Do They Cost?

You’ll pay only a small percentage of the total $25,000 bond amount when you purchase an Alabama auto dealer’s bond. That percentage, known as the premium rate, is assigned by the surety on a case-by-case basis.

The biggest factor in the surety’s assessment of risk and premium rate assignment is the dealer’s personal credit score. If your credit is good, you’ll be assigned a lower premium rate than someone with an unfavorable credit history.

Get Bonded Today

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