Kentucky 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 Kentucky auto dealer bond needs.
What Are They?
In Kentucky, auto dealers are licensed and regulated by the Kentucky Department of Transportation, Motor Vehicle Commission. Purchasing a Kentucky auto dealer bond is a mandatory step in the licensing process.
A Kentucky auto dealer bond is a motor vehicle dealer’s guarantee to operate in full compliance with the laws and rules regulating the industry. Any violation that causes financial harm to the state or to the public gives the injured party the opportunity to recover damages by filing a claim against the offending dealer’s auto dealer bond.
Who Needs Them?
Every applicant for one of the 11 types of auto dealer licenses issued in Kentucky must purchase a Kentucky auto dealer bond in an amount determined by MVC upon review of the license application. The required bond amount (also known as the bond’s “penal sum”) can be anywhere between $25,000 and $100,000, depending on the dealer’s sales history and financial standing.
Speak with a Surety Bond Professionals agent today to discuss your bonding needs.
How Do They Work?
The three parties to the legally binding surety bond agreement for a Kentucky auto dealer bond are known in the language of surety bonds as the obligee, principal, and surety.
- The obligee is MVC, the party mandating the purchase of the bond.
- The principal is the dealer, the party required to purchase the bond.
- And the surety is the bond’s guarantor.
When a principal violates the terms of the surety bond agreement (for example, failing to remit taxes to the state or misrepresenting the condition of a vehicle), and it results in a financial loss to the state, an individual, or a business, the injured party can file a claim against the principal’s Kentucky auto dealer bond. If the surety deems the claim legitimate, the principal is legally obligated to pay it.
However, because the surety has guaranteed the payment of claims, the claimant doesn’t have to wait for the principal to get around to writing a check. The surety will pay the claim initially on the principal's behalf. The principal must then repay that amount to the surety. If need be, the surety can take legal action against the principal to secure repayment.
What Do They Cost?
The annual premium for a Kentucky auto dealer bond is a small percentage of the required bond amount. That percentage is the premium rate, which the surety sets for the principal at the time the bond is purchased. The main underwriting concern is the risk that the principal won’t readily repay the surety for claims paid on the principal’s behalf. The principal’s personal credit score is the generally accepted measure of that risk.
With a high credit score, the principal is considered to be a low risk, and the premium rate will be low as well, perhaps even below 1%. A low credit score suggests a higher risk level and results in a higher premium rate, potentially as high as 3-5%.
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Our surety bond professionals will get you the Kentucky auto dealer bond you need at a competitive rate.