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 your New York car dealer license bond needs.
What Are the Different Types of New York Car Dealer Licenses?
The New York Department of Motor Vehicles (NYDMV) issues licenses to boat dealers, yacht dealers, and vehicle transporters as well as to dealers selling what we typically think of as motor vehicles—new and used cars, trucks, and ATVs, either as retailers to the public or wholesalers doing business only with other dealers. Our focus here is on the most common dealer license type: used car dealer licenses.
What Are the Steps in the Licensing Process?
There are certain things you’ll need to do in preparation for submitting an application to NYDMV for a used motor vehicle dealer license.
- Register your business entity it with the New York State Department of Taxation and Finance (DTF), which can be done online. This will give you the Certificate of Authority and sales tax ID number you’ll need to include on your used auto dealer license application.
- Secure a permanent business location and be able to document your dealership’s legal occupancy through a deed, lease, or other rental agreement.
- Obtain a notarized Business Certificate of Assumed Name from the county clerk where your dealership is located if your business is a partnership or a sole proprietorship operating under a name other than your own. If the business is an LLC or corporation, you’ll need to provide a copy of the receipt you got when you filed the incorporation paperwork with the New York Department of State.
- Purchase Workers’ Compensation insurance if you will have any employees. You’ll need to provide proof of your coverage when you submit your license application.
- Purchase a New York car dealer surety bond. If yours is a new dealership with no prior sales history, the required bond amount is $20,000, as it will be when you renew your bond if in the prior calendar year you sold no more than 50 vehicles. The required bond amount is $100,000 for dealers who sold more than 50 cars in the previous calendar year.
- Complete the Original Facility Application in its entirety, and submit it along with all of the supporting documents requested and payment of fees (currently $487.50) to Vehicle Safety Services, Application Unit, at the address provided on the last page of the application.
Why is a New York Car Dealer Bond Required?
When you purchase a New York car dealer bond, you are pledging that as the bond’s “principal” you will comply with all New York laws governing vehicle sales. You are also accepting the legal obligation to pay valid claims filed against the bond by the state of New York (the bond’s “obligee”) or by any party who has incurred financial damages because of your noncompliance. Common reasons for claims include the failure to pay sales taxes to the state, falsifying odometer readings, or selling a vehicle without revealing prior damage to it. You can lose your used car dealer license if you do not always maintain an active bond.
How Are New York Car Dealer Bond Claims Paid?
The third party to the bond, in addition to the obligee and the principal, is the “surety”—the company guaranteeing that the principal will pay all valid claims. Because of that guarantee, the surety typically will pay a claim initially, and then collect reimbursement from the principal. This ensures that the claimant is paid promptly but is does not relieve the principal of the legal obligation to pay claims. It simply shifts that obligation to repayment of the debt now owed to the surety.
How Much Does a New York Car Dealer Bond Cost?
New York car dealer bonds are sold for an annual premium that is only a small percentage of the required bond amount, that percentage being the premium rate. The surety sets the premium rate for each bond based on the principal’s creditworthiness as measured by the principal’s personal credit score.
Good credit tells the surety that there is little reason to fear not being repaid for claims paid on behalf of the principal. The higher your credit score the lower your premium rate, and vice versa. With excellent credit, your premium rate could be as low as 1%, which would make the annual premium for a newly licensed used car dealer with no prior sales history $200.
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