North Carolina 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 your North Carolina auto dealer bond needs.
What Are They?
North Carolina auto dealer bonds are categorized as license and permit bonds. This is because purchasing one is a prerequisite for obtaining an auto dealer license in the state of North Carolina. The reasons for the bonding requirement are simple and compelling:
- A North Carolina auto dealer bond serves as a new and/or used auto dealer’s guarantee to operate in accordance with the state’s laws and regulations governing the sale of motor vehicles.
- The bond provides a way for the state to recover taxes and fees that the dealer has failed to pay.
- It also provides a source of funds for compensating consumers who have experienced a financial loss to a North Carolina auto dealer’s unlawful or unethical sales practices and actions.
Any violation of the terms of the surety bond agreement gives an injured party the right to file a claim against the bond to seek compensation for damages.
Who Needs Them?
Any applicant for a new or renewal auto dealer license must purchase a $50,000 North Carolina auto dealer bond. Each location requires a separate bond, but after the first location, the required amount for each additional bond is $25,000. There must always be a valid bond in force to avoid revocation of the auto dealer license.
Speak with a Surety Bond Professionals agent today to discuss your bonding needs.
How Do They Work?
The three parties to a North Carolina auto dealer surety bond agreement, a legally binding contract, are:
- The “obligee” that requires the bond (the North Carolina DMV, License and Theft Bureau).
- The “principal” required to purchase the bond (the auto dealer).
- The “surety” that approves and underwrites the bond (the bonding company).
When a claim is filed, the surety will make sure it’s valid and then issue payment directly to the claimant. That may seem a little odd considering that the terms of the surety bond agreement give the principal sole legal responsibility for paying claims. In effect, by paying a claim on behalf of the principal, the surety is lending the principal money, creating a debt that the principal owes and is legally obligated to repay.
What Do They Cost?
The annual premium cost for a North Carolina auto dealer bond is a small percentage of the required bond amount. That percentage depends on how risky the surety’s underwriters think it would be for the surety to pay claims on behalf of the principal. That risk assessment is based primarily on the principal’s credit score, but also takes into account factors such as the principal’s industry experience and any prior claims history.
A principal who is considered a good credit risk will typically pay a premium rate of somewhere between one and three percent. Lesser credit will result in a higher premium rate.
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Our surety bond professionals will get you the North Carolina auto dealer bond you need at a competitive rate.