Utah 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 your Utah auto dealer bond needs.
What Are They?
Utah auto dealer bonds are categorized as license and permit surety bonds. This is because purchasing one is a requirement for becoming licensed to operate an auto dealership within the state. The bond is a dealer’s pledge to abide by all applicable Utah statutes governing the sale of motor vehicles.
A violation of any of those laws that causes a consumer to incur a financial loss gives the injured party the right to file a claim against the bond and be compensated up to the required bond amount, also known as the bond’s penal sum.
Who Needs Them?
Anyone applying for a new auto dealer license from Utah Motor Vehicle Enforcement or renewing an existing license must purchase a Utah auto dealer bond:
- For dealers selling new or used motor vehicles, the required bond amount is $75,000.
- For dealers selling motorcycles or small trailers, the required bond amount is $10,000.
Speak with a Surety Bond Professionals agent today to discuss your bonding needs.
How Do They Work?
A Utah motor vehicle dealer surety bond agreement is a legally binding contract between three parties:
- The obligee (the party requiring the bond) is Utah Motor Vehicle Enforcement.
- The principal (the party purchasing the bond) is the owner of the dealership.
- The surety (the bonding company underwriting and approving the bond) is whatever surety bond company licensed to issue bonds in Utah that the dealer chooses.
The terms of a Utah auto dealer bond obligate the principal to comply with applicable laws and pay any valid claims for damages resulting from a violation of those terms. Common reasons for a claim include:
- Misrepresentations of a vehicle’s condition, such as failing to disclose prior accident or flood damage or tampering with odometer readings.
- Failure to provide a certificate of title or manufacturer’s certificate of origin.
- Failure to pay off liens on trade-in vehicles.
When a claim is filed, the surety will investigate to make sure it’s valid and will then make payment directly to the claimant, up to the bond’s penal sum. Paying a claim on the principal’s behalf creates a debt that the principal must then repay to the surety.
What Do They Cost?
Utah auto dealer bonds are sold for a premium that is a small percentage of the bond’s penal sum. The surety’s underwriters have two main concerns: the likelihood of claims and the risk that extending credit to the principal entails. The former is assessed by looking at the principal’s industry experience and any history of prior claims. The latter is evaluated based on the principal’s personal credit score and personal and business financial strength and stability.
A well-qualified principal will be assigned a premium rate in the standard market rate range of 1% to 2% of the required bond amount. A principal with lesser credit and a less favorable financial situation should still be able to get bonded but will pay a higher premium rate.
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Our surety bond professionals will get you the Utah auto dealer bond you need at a competitive rate.