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 California car auction license bond needs. Learn how to obtain a car auction license in California, below.
What License is Needed to Buy and Sell Cars at Auction in California?
The two main types of auto dealer licenses issued in California are retail and wholesale dealer licenses:
- A retail auto dealer license will give you the broadest range of opportunities to buy and sell pre-owned vehicles through the auction process in California. It allows you to buy and sell pre-owned vehicles at both dealer-only and public auctions.
- A wholesale license allows you to buy and sell at dealer-only auctions, but you may not auction pre-owned vehicles to the public.
There are some requirements for obtaining a retail vehicle dealer license that don’t apply to wholesale dealer licenses, such as having to maintain an approved office and car lot. Wholesale dealers can work from a home office.
What Are the Steps in the Licensing Process?
The following points provide a broad overview of what you’ll need to do to obtain a retail vehicle dealer license.
- Register your business with the local authorities and obtain a business license or tax certificate.
- Register with the California Department of Tax and Fee Administration. Obtain a seller’s permit to collect sales taxes from customers and remit them to the state.
- Open a bank account in the name of your business.
- Purchase a California auto dealer surety bond in the amount of $50,000.
- Pass a live scan fingerprint check.
- Complete a Used Dealer Application and submit it to the nearest DMV Occupational licensing office.
- Pass a location inspection of your retail business premises.
Why is a Retail Vehicle Dealer Bond Required?
Purchasing a retail California auto dealer bond is a mandatory step in the process of obtaining a retail vehicle dealer license in California. The bond is a dealer’s pledge to do business in accordance with applicable state laws and to compensate anyone with a valid claim for damages stemming from the dealer’s unlawful or unethical actions.
The bond also indemnifies both the surety bond company and the California DMV against any legal responsibility for paying such claims.
How Are Retail Vehicle Dealer Bond Claims Paid?
The surety bond agreement for a California retail vehicle dealer bond is a legally binding contract between three parties:
- The California DMV (the “obligee” requiring the bond)
- The retail/auction dealer (the “principal required to purchase the bond)
- The bonding company underwriting and authorizing the bond (the “surety”).
Although this contract legally obligates the principal to pay valid claims against the bond, what typically happens is a little different.
The surety normally pays a valid claim on the principal’s behalf and is then reimbursed for the resulting debt. It’s a very practical arrangement that resolves claims expeditiously and gives the principal the ability to repay the surety in installments over a certain period of time.
How Much Does a California Retail Vehicle Dealer Bond Cost?
The annual premium for a retail dealer bond is calculated as a small percentage (as low as 1% to 3%) of the required $50,000 bond amount. The surety’s biggest concern is being repaid for claims paid on behalf of the principal. So, the underwriters consider both the principal’s creditworthiness and the likelihood of claims. They look at the principal’s personal credit score, financial strength, and industry experience and assign the premium rate accordingly. Less qualified principals could pay a premium rate of 10% or even higher.
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