What is a Michigan auto dealer bond?
The Michigan auto dealer bond is part of a broad set of regulatory requirements called surety bonds. All state governments require that car dealers obtain an auto dealer bond before they are issued a business license.
The purpose of auto dealer bonds, like most surety bonds, is to protect the public– in this case car buyers. Bonds are a three-party agreement, between the dealer (principal), the state (obligee) and the bonding company which backs the bond. In case a dealership breaches the bond agreement, an affected side has the right to file a claim. When a claim is proven, the dealership and the bonding company have a joint responsibility for reimbursing the claimant. For this reason your dealership should always be current with regulations and laws that might affect your business.
Here is a quick overview of the auto dealer bond requirement in Michigan:
Surety Bond Name: Michigan Auto Dealer Bond
Surety Bond Amount: $10,000
Obligee: Michigan Department of State
Business Licensing and Regulation Division
Lansing, MI 48918
Expiration Date: Annual renewal
Ready to apply for you Michigan auto dealer bond? Simply click on the Apply Now button and you will be forwarded to our online application.
If you want to learn more about this requirement, check out the Questions sections below.
Questions about Surety Bonds in Michigan
- Do all dealers need to post a Michigan auto dealer bond?
- How much does a Michigan auto dealer bond cost?
- Are bad credit auto dealer bonds available?
- How do I get a Michigan auto dealer bond?
- How do I renew my Michigan auto dealer bond?
- How do I get a Michigan dealer license?
- What if there is a bond claim against my dealership?
Do all dealers need to post a Michigan auto dealer bond?
Yes, this requirement pertains to all motor vehicle dealer applications, regardless of whether you want to sell new or used cars. Furthermore, the dealer bond must remain in effect for as long as you want to hold a dealer license.
How much does a Michigan auto dealer bond cost?
At $10,000, the total bond amount of the Michigan auto dealer bonds is one of the lowest in the country. Still, this amount does not refer to the amount required dealers are required to pay. Rather, it’s the amount of coverage the auto dealer bond offers.
To obtain the auto dealer bond, dealers pay in annual premiums, which comprise a few percentage points of the total bond amount. Exactly how much you pay depends on the surety bond company underwriting the bond. They evaluate your application and calculated your bond premium based on a few factors, primarily your personal credit score.
|Surety Bond Cost Based on Credit Score|
|Surety Bond Name||Surety Bond Amount||Above 700||Between 650-699||Between 600-649||Below 599|
|Michigan Auto Dealer Bond||$10,000||$100-$150||$100-$300||$250-$500||$500-$750|
Applicants with good credit and no major credit issues pay premiums as low as 0.75%, and no more than 3% of the total bond amount.
Your surety bond application may contain additional information about your business. While not obligatory, this type of information may help reduce your premiums, because it shows the surety that underwriting an auto dealer bond for your dealership is less of a risk than might be presumed based on credit score alone. This information might include financial statements, asset profile, or even a CV demonstrating your industry experience.
For more detailed information on surety bond costs, go to our What Does a Surety Bond Cost? Page.
Are bad credit auto dealer bonds available?
Yes, Lance Surety Bonds offers bad credit auto dealer bonds. Thanks to our bad credit program, we successfully provide dealer bonds for 99% of applicants.
Due to the higher risk involved for bonding companies, they typically raise premiums for such applicants. You can expect premiums of between 5% and 10% if you have bad credit or other credit issues.
How do I get a Michigan auto dealer bond?
Getting a Michigan auto dealer bond is a breeze thanks to our online application. We offer instant free quotes and approval, which do not oblige you in any way.
After you complete all the necessary steps, we will be able to issue your bond in just 1-2 days. If there is anything you need help with, feel free to call us at (877) 514-5146.
How do I renew my Michigan auto dealer bond?
Car dealer licenses expire every year on December 31, and need to be renewed for the next year along with all dealer bonds.
Renewal is actually quite simple. We will send you a new quote, and once we’ve received payment, you can rest assured that you are compliant. If you take steps to improve your financial stability or credit score, your renewal quotes will usually go down each time bond renewal is due.
How do I get a Michigan dealer license?
To apply for a Michigan dealer license, you need to follow all steps listed on the website of the Michigan Department of State. The auto dealer bond is one of them, but the requirements also include:
- Submitting fingerprints
- Obtaining a Sales ID Tax Number
- Submitting a zoning approval
- Obtaining a no-fault fleet type insurance
- Having an approved business location
- Paying applicable fees
Remember, you need to renew your license before the end of each calendar year or it will be revoked.
What if there is a bond claim against my dealership?
If you strictly follow all rules and regulations, you shouldn’t expect to face bond claims. However, if you happen to be in a dispute with a client, your best course of action is to settle it out of court.
If that’s not possible and you believe you are in the right, make sure you keep thorough documentation of your communication with the client. It will come in very handy in court. If, despite your efforts, the claim is considered valid, you will be responsible for financially compensating the claimant.
Still got questions about your Michigan auto dealer bond? Call us at (877) 514-5146 and let us know how we can help.