Pennsylvania 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 of your Pennsylvania auto dealer bond needs.
What Are They?
Pennsylvania auto dealer bonds are the state’s first line of defense in protecting itself and consumers against financial loss stemming from the unlawful or unethical business practices of licensed motor vehicle dealers. They legally obligate dealers who violate Pennsylvania’s laws regulating the vehicle trading industry to compensate those with valid claims for damages.
Common reasons for consumer claims against an auto dealer bond include a dealer’s deliberate misrepresentation of a vehicle’s condition, tampering with an odometer, altering vehicle titles, and other acts of fraud. The state can also file a claim if the dealer fails to remit taxes and fees due.
Who Needs Them?
Anyone selling or dealing in motor vehicles in Pennsylvania must obtain a dealer’s license from the Pennsylvania Department of Transportation (DOT). Purchasing a $20,000 Pennsylvania auto dealer bond is a prerequisite for licensure.
Those required to be licensed in more than one category (e.g., for operating a dealership and for selling vehicles at auction) must purchase a bond for each license type. Dealers with more than one dealership location will need a bond for each location. Dealers who fail to maintain an active bond in force at all times risk the loss of their dealer’s license.
Speak with a Surety Bond Professionals agent today to discuss your bonding needs.
How Do They Work?
A Pennsylvania auto dealer bond is a legally binding contract among three parties. As you can imagine, two of those are the Pennsylvania DOT (which requires the bond and is known as the bond’s “obligee), and the dealer (referred to as the bond’s “principal”). The third party is the bond’s guarantor (called the “surety”).
Upon receipt of a claim, the surety will establish its validity and approve it for payment. The auto dealer bond obligates the principal to pay all valid claims. But in practice, having guaranteed the payment of claims, the surety will pay a claim initially and then be repaid by the principal. If the principal does not repay that debt voluntarily, the surety can take legal action to recover not only the claim amount but also court costs and legal fees.
What Do They Cost?
Pennsylvania auto dealer bonds are sold for an annual premium that is a small percentage of the required $25,000 bond amount. That percentage, the premium rate, is set by the surety depending on an underwriting assessment of the risk of extending credit to the principal. The main risk indicator is the principal’s personal credit score.
A high credit score correlates with a low risk of not being repaid for claims paid on the principal’s behalf and therefore results in a low premium rate. Conversely, a low credit score is a warning flag indicating a high-risk level, which warrants a substantially higher premium rate. Depending on where a given principal falls on the risk continuum, the premium rate for a Pennsylvania auto dealer bond could be less than one percent or as much as three percent.
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Our surety bond professionals will get you the Pennsylvania auto dealer bond you need at a competitive rate.