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 Oklahoma auto dealer bond needs.
What Are They?
Oklahoma auto dealer bonds legally obligate licensed auto dealers to operate in compliance with the laws and rules regulating auto trading in the state or pay for the damage their unlawful and unethical actions do to the state and to consumers. A violation of the terms of an Oklahoma auto dealer bond gives any injured party the right to file a claim against the bond to recover damages.
Who Needs Them?
In Oklahoma, only those dealing in used motor vehicles must purchase an auto dealer bond—salespersons, rebuilders, retail and wholesale dealers, and auctioneers. The required bond amount depends on the type of dealer’s license. Used motor vehicle retail and wholesale dealers are required to furnish the Oklahoma Used Motor Vehicle and Parts Commission a $25,000 bond as a mandatory step in the licensing process. Although the bond amounts differ, all Oklahoma auto dealer bonds have a two-year term. There must always be an active bond in force to prevent the loss of the dealer’s license.
Speak with a Surety Bond Professionals agent today to discuss your bonding needs.
How Do They Work?
The power of an auto dealer bond to incentivize ethical and lawful behavior comes from the fact that it is a legally binding contract. The three parties to the contract are:
- The “obligee” (The Oklahoma Used Motor Vehicle and Parts Commission),
- The “principal” (the dealer), and
- The “surety” (the bond’s guarantor).
There are a number of common violations that can cause a consumer to incur a financial loss and file a claim for damages, such as the dealer’s falsification of odometer readings, fraudulent alteration of titles, misrepresenting the condition of vehicles, and more. When a claim is filed against an Oklahoma auto dealer bond, the surety investigates to determine whether it is valid and therefore must be paid.
Although the surety bond agreement legally obligates the principal to pay any valid claim against the bond, it’s the surety, not the principal, that pays a claim initially. The principal must then reimburse the surety. That’s because the surety has guaranteed the payment of claims but is indemnified by the terms of the surety bond agreement. The surety’s initial payment of a claim on the principal’s behalf simply shifts the principal’s obligation to repayment of that debt. If need be, the surety can take legal action against the principal to recover the amount of the claim, plus court and legal fees.
What Do They Cost?
The premium for an Oklahoma auto dealer bond is determined by multiplying two factors: the required bond amount for the particular license class and the premium rate set by the surety on a case-by-case basis. The main underwriting concern is the risk that the principal might not repay the surety as required for claims the surety pays on the principal’s behalf. That risk is measured by the principal’s personal credit score.
The higher the principal’s credit score, the lower the perceived risk, and consequently the lower the premium rate. With outstanding credit, the premium rate could be around one percent. A low credit score is a warning sign of a significantly higher risk, which means the surety will set a much higher premium rate, conceivably three percent or even more. There can be a difference of more than $500 between what a highly creditworthy principal and a principal with poor credit will pay for a two-year Oklahoma auto dealer bond.
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Our surety bond professionals will get you the Oklahoma auto dealer bond you need at a competitive rate.