Virginia 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 Virginia auto dealer bond needs.
What Are They?
Virginia auto dealer bonds protect the state and public against financial harm caused by the sales practices of auto dealers licensed in Virginia. Consequently, these bonds help maintain consumer confidence in the industry despite the few bad apples that may put profit before ethics.
A Virginia auto dealer bond is a dealer’s guarantee to comply with all applicable Virginia statutes governing motor vehicle sales, specifically Chapter 15, Title 46.2 of the Virginia Code. It also provides a source of funds for compensating any party experiencing a financial loss for which a licensed Virginia auto dealer is found liable.
Who Needs Them?
Every auto dealer seeking a dealership license from the Virginia Department of Motor Vehicles must purchase a $50,000 Virginia auto dealer bond as a mandatory step in the licensing process. This applies to both independent dealer-operators and franchise dealer-operators. There must be an active bond in force at all times to prevent license suspension or revocation.
While a Virginia auto dealer bond is issued to the individual applying for an auto dealer license, it also covers financial losses caused by employees of the dealership.
Speak with a Surety Bond Professionals agent today to discuss your bonding needs.
How Do They Work?
Virginia auto dealer bonds are established based on a surety bond agreement that brings together three parties in a legally binding contract:
- The party requiring the bond, the Virginia DMV, is the oblige.
- The auto dealer required to purchase the bond is the principal.
- The bonding company that underwrites and approves the bond is the surety.
The terms of a Virginia auto dealer bond obligate the principal to pay all valid claims. Interestingly, the surety typically will pay the claim on behalf of the principal, drawing on a line of credit established for the principal at the time the bond was issued. The principal must then repay this debt to the surety, but often is able to do so in manageable installments.
What Do They Cost?
Virginia auto dealer bonds, like most surety bonds, are sold for an annual premium that is a small percentage of the required bond amount, also referred to as the bond’s penal sum. The surety’s underwriters determine what that percentage, the premium rate, will be on a case-by-case basis. The two main concerns are how likely it is that a given dealer will incur claims and the risk involved in extending credit for paying claims.
With a good personal credit score, financial stability, and experience in the industry, an applicant for a Virginia auto dealer bond should qualify for the standard market premium rate, which ranges from 1% to 2% of the bond’s $50,000 penal sum.
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Our surety bond professionals will get you the Virginia auto dealer bond you need at a competitive rate.