By purchasing a dealer surety bond California, a business owner agrees to avoid fraudulent work practices that could cause monetary loss to a purchaser, seller, financing agency or governmental agency. If a dealer breaks the bond’s terms, the bond amount can be used to pay for fines, penalties, fees and other costs incurred as a result of the violation.
2. Who needs a California auto dealer bond?
Before applying for a new or renewed license, every auto dealer and vehicle remanufacturer who works in California must file a $50,000 surety bond with the Department of Motor Vehicles. As long as they sell fewer than 25 vehicles each year, motorcycle dealers, motorcycle lessor-retailers, all-terrain vehicle dealers and wholesale-only dealers only need to file $10,000 surety bonds with the Department of Motor Vehicles.
3. How do auto dealer bonds work?
To put it simply, surety bonds are three-party contracts that require a certain level of performance. The principal is the auto dealer who purchases the bond as a guarantee of future work performance. The obligee is the party that requires the principal to purchase a bond, which, in this case, is the Department of Motor Vehicles. Finally, the surety is the insurance company that guarantees the bond.
If a bonded principal does not fulfill the bond’s terms, then the obligee can make a claim against the bond to collect reparation for damages. If the claim is found to be valid, the surety will pay the obligee. Unlike traditional insurance policies, however, auto dealers are expected to reimburse the insurance company for any claims made against a bond
4. How can I prevent claims against my bond?
According to California Vehicle Code Section 11710, a dealer’s license will be automatically suspended if a court finds the professional liable for certain actions protected under the bond. The license can only be reinstated if the bond is reinstated or if a new bond is purchased. To avoid having claims made against your bond, simply comply with its terms. As with any other legal contract, you should fully understand the terms you’re agreeing to before you sign it.
5. How do I get a surety bond?
When you contact a surety provider, you’ll have to answer basic questions about your professional work experience and personal financial history. Auto dealer bond applications require applicants to provide their social security numbers so the surety can review their credit scores. If your business has more than one owner, the financial credentials of all owners will be considered.
After you approve the quote, you’ll probably be required to pay the full premium upfront. Sometimes surety underwriters can offer premium financing to qualifying applicants. Once you’ve paid your premium, the surety provider will execute your bond and then send it to you.
Surety bonds can be confusing, but with a basic understanding of how they work, you’ll be better prepared to get one when it’s time to renew your California auto dealer license.

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