In this article, we’ll walk you through everything you need to get a Pennsylvania car dealer license.
Surety Bond Professionals is a family owned and operated bonding agency with over 30 years of experience. Our expert agents are ready to assist with all your Pennsylvania car dealer license bond needs.
What Are the Different Types of Pennsylvania Car Dealer Licenses?
Pennsylvania issues three main types of motor vehicle dealer licenses for:
- New vehicle dealers
- Used vehicle dealers
- Motorcycle dealers
Other vehicle dealer and related licenses fall into the “Miscellaneous” category. This article focuses on the licensing of Pennsylvania dealers selling used motor vehicles.
What Are the Steps in the Licensing Process?
Pennsylvania encourages motor vehicle dealers to apply for their initial license and renew existing licenses online through the Pennsylvania Licensing System, or PALS, so the first step in obtaining your dealer license is to register for a PALS account.
The system will walk you through the application; simply follow the checklist accessed by clicking in the top right corner of the PALS screen. There are some tasks you’ll need to accomplish offline to obtain documents that will need to be uploaded and submitted with the application, such as:
- Registering your legal business entity with the Pennsylvania Corporation Bureau (specific documentation requirements depend on the type of entity)
- Securing a permanent business location and obtaining a Certificate of Occupancy from the Department of Labor and Industry or from the municipality where your dealership is located
- Purchasing liability insurance
- Purchasing Workers’ Compensation insurance if you will have employees
- Purchasing a $20,000 Pennsylvania car dealer bond
Once your application and supporting documents have been reviewed and approved, your dealership will be inspected by a Vehicle Board agent and, if it passes, your license will be mailed to you.
Why Is a Pennsylvania Car Dealer Bond Required?
When you purchase a Pennsylvania car dealer bond you are pledging to operate your dealership in accordance with all applicable Pennsylvania laws and regulations. If you fail to do so, any party suffering a financial loss as a result of your unlawful or unethical actions can file a claim for damages against your bond. And the terms of the surety bond agreement legally obligates you to pay any valid claim.
How Are Pennsylvania Car Dealer Bond Claims Paid?
Of the three parties to a Pennsylvania car dealer bond, which is a legally binding contract between the commonwealth (the “bond’s “obligee”), a vehicle dealer (the “principal”), and the company guaranteeing the bond (the “surety”), only the principal has any legal obligation to pay claims. However, the surety guarantees that the principal will honor that obligation and therefore will pay a claim initially and then collect reimbursement from the principal. If the principal fails to reimburse the surety, the surety has the right to take legal action against the principal.
How Much Does a Pennsylvania Car Dealer Bond Cost?
When you buy a Pennsylvania car dealer bond, you’ll pay an annual premium that is only a small percentage of the required $20,000 bond amount. That percentage, the bond’s premium rate, is established by the surety based on an underwriting assessment of the risk that you might not repay the surety for claims paid on your behalf.
The best measure of that risk is your personal credit score. The better your credit, the lower your premium rate will be, potentially as low as one percent, which would make your annual bond premium only $200.
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