Alabama 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 Alabama auto dealer bond needs.

What Are They?

In 2020, Alabama consolidated all of its previous auto dealer license categories—new and used auto dealer, rebuilder, reconditioner, and wholesaler—into one “master dealer” license. Obtaining or renewing a master dealer license requires the purchase of an Alabama auto dealer surety bond. The bond provides financial protection for the Alabama Department of Revenue, which licenses auto dealers, and consumers.

An Alabama auto dealer bond serves as a dealer’s guarantee to operate in compliance with all applicable Alabama laws and regulations. It indemnifies the Department against responsibility for any financial harm experienced by consumers as a result of a licensed dealer’s unlawful or unethical business practices. The bond also ensures that funds will be available to compensate those consumers.

Who Needs Them?

Every dealer applying for a new master auto dealer license must purchase an Alabama auto dealer bond with the same term as the license. The bond will need to be renewed at the same time as the dealer license.

The minimum required amount (or “penal sum”) for an Alabama auto dealer bond is $50,000. Some dealers, such as those maintaining multiple locations, may be subject to a higher bond amount.

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

How Do They Work?

The three parties to an Alabama auto dealer surety bond agreement, which is a legally binding contract, are:

  • The Department of Revenue (the “obligee” requiring the bond)
  • The auto dealer (the “principal” purchasing the bond)
  • The surety bonding company (the “surety” authorizing the bond)

The principal’s violation of any of the terms of the surety bond agreement can result in claims against an Alabama auto dealer bond. The legal responsibility for paying valid claims belongs to the principal. However, in practice, the surety will typically pay a valid claim on behalf of the principal, which creates a debt that the principal must then repay to the surety. The claimant benefits by being compensated promptly, and the principal benefits from being able to repay the surety in manageable installments over time.

What Do They Cost?

The premium a principal will pay for an Alabama auto dealer bond is a small percentage of the bond’s penal sum. The surety decides what that percentage, the premium rate, will be. In paying valid claims on behalf of the principal, the surety is extending credit to the principal, which makes the principal’s creditworthiness the main concern in setting the premium rate.

A principal with a high personal credit score and good business financials will pay a premium rate that is in the range of 1% to 3%. A principal with lesser credit may pay a higher premium rate.

Get a Quote

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