South Dakota 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 South Dakota auto dealer bond needs.
What Are They?
South Dakota auto dealer bonds require licensed dealers to abide by the laws that regulate motor vehicle trading within the state. The consequence for violations—that result in financial harm to the state, such as failing to pay required taxes and fees—or of defrauding consumers is that you are legally obligated to pay valid claims for damages filed against the bond.
Who Needs Them?
The South Dakota Department of Revenue (DOR) issues several types of motor vehicle licenses, differentiated by the types of vehicles sold. Purchasing an auto dealer bond is mandatory regardless of the type of license sought. The most common license is for dealers selling new or used vehicles or mobile or manufactured homes, which carries a $25,000 bonding requirement. The required bond amount for other license types is less.
A South Dakota car dealer bond must be renewed by every expiration date, because not maintaining an active bond in force at all times is cause for revocation of a dealer’s license.
Speak with a Surety Bond Professionals agent today to discuss your bonding needs.
How Do They Work?
Certain terms are used to refer to the three parties to a South Dakota car dealer bond. DOR, which requires the bond, is known as the “obligee,” the dealer is the “principal,” and the party guaranteeing the payment of claims by the principal is the “surety.”
The best way to explain how a South Dakota auto dealer bond works is through an example. Suppose that a licensed dealer deliberately misleads a customer about the condition of a vehicle, and the customer purchases the vehicle based on that misleading information. When the vehicle requires major repairs shortly after the limited warranty on it expires, it costs the customer thousands of dollars in repairs. The customer files a claim against the bond to recover that amount, and the surety finds that the claim is valid.
Although the dealer, as the bond’s principal, is legally obligated to pay all valid claims, the surety has guaranteed their payment. Therefore, the surety will pay the claim on the principal’s behalf and then be reimbursed by the principal.
What Do They Cost?
The annual premium rate for a South Dakota auto dealer bond is a small percentage of the required bond amount. That percentage is the premium rate, which is set by the surety at the time the bond is sold. It can range from one percent for a principal with outstanding credit to as much as three percent for someone with poor credit.
The principal’s personal credit score is used by the underwriters as a measure of the risk that the principal might not readily repay the surety for claims paid by the surety on the principal’s behalf. The higher the principal’s credit score, the lower the risk to the principal and vice versa.
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Our surety bond professionals will get you the South Dakota auto dealer bond you need at a competitive rate.