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 of your Delaware auto dealer bond needs.
What Are They?
Delaware auto dealer bonds are more appropriately referred to as auto dealer license bonds, because purchasing one is a mandatory step in obtaining a license from the Delaware Division of Motor Vehicles to operate a dealership anywhere in the state. The bond is a dealer’s pledge to operate in compliance with all Delaware laws and regulations governing auto sales. And it provides financial protection for the state of Delaware and consumers in the event that a licensed auto dealer’s unlawful or unethical business practices cause them financial harm.
Who Needs Them?
With few exceptions, anyone who buys, sells, exchanges, advertises or negotiates the sale of 5 or more motor vehicles within a 12-month period must be licensed as a dealer. The term “motor vehicles” encompasses a wide range of vehicles: cars, trucks, recreational vehicles, utility vehicles, trailers, motor homes, motorcycles, and even mobile homes. Dealer licenses are classified according to the types of vehicles sold, whether those vehicles are new or used, how they are sold (from a lot or at auction), and the nature of the dealer’s customers (the public or other dealers).
Licensed auto dealers must always have an active $25,000 auto dealer bond in place to avoid license revocation. Consequently, they must renew their bond at every license renewal.
Speak with a Surety Bond Professionals agent today to discuss your bonding needs.
How Do They Work?
The three parties to a Delaware auto dealer bond, a legally binding contract, are known as the obligee, the principal, and the surety:
- The obligee, the party requiring the bond, is the Delaware DMV,
- The principal, the party purchasing the bond, is the dealer, and
- The surety is the party guaranteeing the payment of claims by the principal.
When a claim for financial damages is filed against a Delaware auto dealer bond and the surety determines that it is valid, it must be paid by the principal. However, although the principal is legally obligated to pay all valid claims, the surety usually pays a claim initially, on the principal’s behalf, and is later reimbursed by the principal.
What Do They Cost?
The annual premium cost for a Delaware auto dealer bond is the result of multiplying the required bond amount established by the obligee by the premium rate set by the surety. The premium rate depends largely on how risky the underwriters believe it would be for the surety to count on the principal to repay the surety for claims paid on behalf of the principal. The best predictor of that risk is the principal’s personal credit score.
A principal with a high personal credit score has handled credit responsibly in the past and deserves a low premium rate, which should be in the range of 1% to 2%. A principal with a low credit score will pay a higher premium rate, perhaps as high as 3% to 5%.
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Our surety bond professionals will get you the Delaware auto dealer bond you need at a competitive rate.