What’s the purpose of the California used car dealer bond?
Most states offer some sort of protection to used car buyers and California is no exception. The used car dealer bond is required from licensed used vehicle dealers as a way to offer quick recourse to a buyer who may have become the victim of fraud. Anyone selling more than 25 vehicles a year is considered a dealer in the state.
To get bonded, used car dealers must apply and get approved by a bonding company. The bonding company vouches to the obligee (the DMV) that the dealer will follow applicable states and federal regulations– or face a claim against the bond.
If a claim is filed and the dealer does not make good on it, the surety is legally required to pay the claim instead. Afterwards, it will seek full reimbursement from the dealer.
If you’re looking to get bonded as a used car dealer in California, you’ll find more useful information in the sections below. If you still have questions, feel free to call us at (877)-514-5146.
Questions about California Used Car Dealer Bond
What’s the cost of getting bonded?
This bond’s penal sum is $50,000, i.e., an individual claim (or the sum of all current claims) cannot exceed $50,000.
The cost for dealers is an annual premium, which can be as low as 1% of the bond amount for applicants with a good credit score. Surety companies consider your credit score to be important because they use it to estimate the risk that you will trigger a claim, and your ability to repay it. For an estimate on your costs, consult the table below.
|Bond Type||Surety Bond Amount||Above 700||Between 650-699||Between 600-649||Below 599|
|California Used Car Dealer Bond||$10,000||$100-$150||$100-$300||$250-$500||$500-$1,000|
In some cases, a bonding company can ask for additional information other than what’s in your credit report. This typically includes submitting financial statements, providing proof of liquid assets or even submitting a resume. Even your business’s age can influence your premium.
What if my credit score is low?
Applicants with a low credit score, no credit history, or other problematic items in their credit reports are all considered high-risk. As you can see from the table above, their premium also tend to be higher than those of applicants with a higher credit score.
However, apart from the premium, your credit score alone is not an obstacle to getting bonded. Moreover, even if you have to pay a higher premium, you have a chance to improve your credit by the time your renewal is due. You can find out more about this on our Bad Credit Surety Bonds page.
How do I apply?
To apply, you can submit our online application and get your free bond quote. As part of the application process you may be asked to submit financial statements, proof of your business’s age and your dealer’s license number. You also need to submit ownership information and sign an indemnity agreement with the surety.
Once we have processed the required paperwork and your payment, we can usually issue your bond within two business days. We will immediately send it to you via mail, and you can also request a digital copy via fax or email.
How do I get a California used car dealer license?
Getting licensed as a used car dealer in California involves a number of important requirements. Before you can submit your application, you must attend a dealer education program and successfully pass an examination administered by the DMV.
You will then need to pay applicable fees and submit some additional paperwork. Be sure you have all the facts, by downloading the Used Dealer or Dealer Wholesale Only Checklist from the DMV’s website.
Dealer licenses in California are valid for one year, and renewal applications need to be submitted before the expiration date, or on the expiration date the latest. For your application to be valid, you must also have renewed your used car dealer bond at the time of submitting it.
What do I need to know about bond claims?
The language on the bond form indicates that you need to comply with the provisions of the Vehicle Code Section 11710.
You may become liable if you engage in “any fraud or make any fraudulent representation which will cause a monetary loss to a purchaser, seller, financing agency, or government agency.” In case you transgress the terms of the bond agreement, you’ll be notified of a valid claim which you must pay in full.
Failing to make good on a claim can be quite detrimental to your business, so it’s best to do everything you can to avoid this scenario.