Kansas Auto Dealer Bonds
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 Kansas auto dealer bond needs.
What Are They?
The Kansas Department of Revenue (DOR) licenses the state’s auto dealers. Anyone who sells more than five vehicles in a single year must be licensed as a dealer. Obtaining a Kansas auto dealer bond is an inescapable requirement for licensing.
The purpose of the bond is to provide financial protection for DOR and the public by making dealers legally responsible for compensating those who incur a loss as a result of a dealer’s noncompliance with the laws and regulations governing motor vehicle sales in Kansas.
Common violations include not remitting tax payments to DOR, altering vehicle titles, falsifying odometer readings, and misrepresenting the condition of a vehicle. Any of these unlawful and unethical practices (and many more) can result in an injured party filing a claim for damages against an auto dealer bond.
Who Needs Them?
Anyone applying for one of the 23 different types of auto dealer licenses issued in Kansas must purchase a $30,000 Kansas auto dealer bond and replace it when it expires. Failure to maintain an active bond in force at all times can result in the loss of the auto dealer’s license.
Speak with a Surety Bond Professionals agent today to discuss your bonding needs.
How Do They Work?
The surety bond agreement for a Kansas auto dealer bond is a legally binding contract among three parties that are referred to as the bond’s obligee, principal, and surety.
- The obligee, the party imposing the bonding requirement, is the Kansas DOR.,
- The principal, the party required to purchase the bond and pay all valid claims against it, is the dealer, and
- The surety is the party guaranteeing that the principal will pay all valid claims.
Any party that has experienced a financial loss as a result of the principal’s unlawful or unethical actions can file a claim against the bond and be compensated for the loss. Upon receipt of a claim, the surety will investigate it to make sure it’s valid and should be processed for payment. Yes, the principal is legally obligated to pay all valid claims, but as the guarantor, the principal typically pays the claim initially, essentially advancing credit to the principal in the amount of the claim. This shifts the principal’s obligation from paying the claimant directly to repaying the debt now owed to the surety. The surety can take legal action against the principal, if necessary, to recover the amount owed.
What Do They Cost?
Two factors go into determining the annual premium cost for a Kansas auto dealer bond: 1) the $30,000 bond amount established by DOR and 2) the premium rate set for the principal by the surety. The main underwriting consideration is whether or not the principal is likely to repay the surety readily for claims paid by the surety.
The best measure of the risk that extending credit to a given principal entails is the principal’s personal credit score. A high credit score suggests a low risk level, which is deserving of a low premium rate, potentially 1% or even less. On the other hand, a low credit score is a warning sign that warrants a much higher premium rate, perhaps as high as 3%.
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Our surety bond professionals will get you the Kansas auto dealer bond you need at a competitive rate.