Louisiana Auto Dealer Bonds
Learn everything you need to know about Louisiana auto dealer bonds, and get bonded today with Surety Bond Professionals.
What Are They?
Louisiana auto dealer bonds provide protection for both the state and consumers by ensuring that dealers operate in accordance with all applicable laws and regulations. Obtaining the bond is a requirement for becoming licensed as an auto dealer in the state of Louisiana. You must maintain a valid bond at all times or face revocation of your auto dealer license.
Here’s a quick look at the most important information about Louisiana motor vehicle dealer bonds:
- Required Bond Amount: $50,000
- Premium: $250 minimum
- Effective Date: Nov 1
- End Date: Oct 31 of next year
Who Needs Them?
There are two main types of licenses for Louisiana auto dealers, issued by two different agencies:
- New car dealers are licensed by the state’s Motor Vehicle Commission (MVC)
- Used car dealers are licensed by the Louisiana Used Motor Vehicle Commission (LUMVC)
There are other types of auto dealer licenses, for example for leasing agencies, but by far the most common license is the used car dealer license—so that’s the focus here. All used car dealers applying for a new license or renewing an expiring license must first purchase a $50,000 surety bond.
How Do They Work?
A Louisiana used auto dealer bond agreement is a legally binding contract among three parties:
- The LUMVC, which requires the bond, is known as the “obligee”
- The auto dealer is the “principal”
- The company that underwrites and issues the bod is the “surety”
Each of these parties has specific rights and responsibilities under the terms of the surety bond agreement.
The bond is intended to ensure that used car dealers do business in a completely legal and ethical way. Unfortunately, that’s not always the case. If the unlawful or unethical actions of a used car dealer cause a financial loss to someone, that injured party has the right to file a claim against the bond and be compensated up to the required (or penal) amount of the bond.
What Happens When a Claim is Filed?
Upon receiving a claim against the bond, the first thing the surety does is conduct an investigation to make sure that the claim is valid. Once a claim is determined to be valid, ideally the principal will pay it right away, but often the principal needs some time to gather the necessary funds.
When the principal can’t pay a claim quickly, the surety typically steps up and pays it, but only as an advance on behalf of the principal. The principal bears sole legal responsibility for paying claims and is obligated to reimburse the surety for all such advance payments.
What Do They Cost?
The principal pays an annual premium for the surety bond. The premium is a small percentage of the total $50,000 bond amount. That percentage is set by the surety based largely on the principal’s personal credit score, though both personal and business financials may also be taken into account.
In general, the higher your credit score, the lower your premium rate. If your credit is good, your premium rate should be in the standard market range of 1% to 3%.
Get Bonded Today
Do you need a bond for your Louisiana car dealership? Request a quote online or give us a call today.