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 Iowa auto dealer bond needs.
What Are They?
In Iowa, the state’s Department of Transportation handles the licensing of auto dealers. Purchasing an Iowa auto dealer bond is a mandatory step in the licensing process. The purpose of the bonding requirement is to protect the state of Iowa and the public from financial loss stemming from a licensed dealer’s violation of the laws and regulations governing vehicle sales within the state.
A dealer’s unlawful or unethical actions such as altering a title, tampering with an odometer, misrepresenting a vehicle’s condition, or failing to remit taxes to the state can result in an injured party filing a claim for monetary damages and being compensated.
Who Needs Them?
Anyone applying for an Iowa auto dealer license is required to purchase a $75,000 surety bond. This bonding requirement applies to all dealer license types (e.g., retail, wholesale, auction, etc.). Dealers who allow their Iowa auto dealer bond to expire without replacing it risk revocation of their auto dealer license.
Speak with a Surety Bond Professionals agent today to discuss your bonding needs.
How Do They Work?
Every surety bond is a legally binding contract among three parties known as the obligee, the principal, and the surety, and an Iowa auto dealer bond is no different.
- The Iowa Department of Transportation is the obligee, the party requiring and protected by the bond,
- The dealer purchasing the bond is the principal and is legally obligated to pay valid claims against the bond,
- And the bond’s guarantor is the surety.
When the obligee or any other party incurs a financial loss as a result of the principal’s violation of the surety bond agreement, the injured party is likely to seek compensation by filing a claim against the bond. The surety investigates all claims to make sure they’re valid and need to be paid.
The legal obligation to pay valid claims belongs solely to the principal, but the surety guarantees payment. So what typically happens is that the surety will pay a claim initially and then be reimbursed by the principal for the resulting debt. If necessary, the surety can take legal action against the principal to recover the money, plus court costs and legal fees.
What Do They Cost?
Like most surety bonds, Iowa car dealer bonds are sold for an annual premium that is a small percentage of the required bond amount. While the obligee established the $75,000 bond amount for all Iowa auto dealer bonds, the surety sets the premium rate on a case-by-case basis. The main consideration in setting that rate is the risk inherent in paying claims on behalf of the principal—namely, the risk of not being repaid by the principal.
The underwriters assess that risk based on the principal’s personal credit score. With a high credit score, the risk is assumed to be low and the principal deserving of a low premium rate. A low credit score means that the risk to the surety is higher, which warrants a much higher premium rate. So, depending on the risk level, the premium rate for an Iowa auto dealer bond could range from less than 1% to 3%.
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Our surety bond professionals will get you the Iowa auto dealer bond you need at a competitive rate.