What Is a Vermont Auto Dealer Bond?
In most states, auto dealers have to undergo a licensing process in order to launch their legal operations. In order to obtain your Vermont auto dealer license, you will have to provide a surety bond.
Your auto dealer bond functions as a safety mechanism for the state and your customers. Its purpose is to guarantee your legal compliance with all applicable rules.
The bond you get is, in practical terms, a three-party contract. Your auto dealership is the principal that has to obtain the bond. The Vermont Department of Motor Vehicles is the obligee, while the surety is the entity providing the bond.
Questions about Auto Dealer Bonds in Vermont
When is this auto dealer bond required?
If you want to start a business as a car dealer in Vermont, you need to get licensed with the state Department of Motor Vehicles. As a part of the process, you have to provide a surety bond. It ensures your compliance with Title 23 of the Vermont Statutes.
The bond amounts required are the following, depending on the number of vehicles you sell per year:
$35,000 – New Dealer Applicants
$20,000 – Dealers with less than 25 vehicles
$25,000 – 25 to 100 vehicles
$30,000 – 101 to 250 vehicles
$35,000 – 251 vehicles or more
What is the bond cost?
The bond amount you have to obtain as a Vermont auto dealer is between $20,000 and $35,000. If this is the first time you’re applying, you will need the maximum amount. The surety bond cost which is your actual pricing is based on the required bond amount. However, it represents only a fraction of it, called the bond premium.
This cost is set on the basis of your personal and business finances. The surety that you apply with needs to examine carefully your personal credit score, company financials, and liquidity and assets you may have. That’s how it can assess how risky it is to get you bonded. The smaller the risk is, the cheaper your bond is likely to get. The typical rates for applicants with solid finances are in the range of 1% to 5% of the bond amount.
|Surety bond name||Surety bond amount||Above 700||Between 650-699||Between 600-649||Below 599|
|Dealers with less than 25 vehicles||$20,000||$150-$300||$200-$600||$500-$1,000||$1,000-$2,000|
|25 to 100 vehicles||$25,000||$187.5-$375||$250-$750||$625-$1,250||$1,250-$2,500|
|101 to 250 vehicles||$30,000||$225-$450||$300-$900||$750-$1,500||$1,500-$3,000|
|251+ vehicles and New dealer applicants||$35,000||$262.5-$525||$350-$1,050||$875-$1,750||$1,750-$3,500|
What happens if I have bad credit?
It is usually more difficult for applicants with problematic finances to get bonded. Lance Surety Bonds has designed its Bad Credit Surety Bonds program to help out in such cases.
As the bonding risk is higher, so are the premiums for bad credit bonds - in the range of 5%-10%. Nevertheless, we are able to obtain various bonding options for you due to our close partnerships with a number of A-rated, T-listed surety companies.
How to obtain my bond?
If you want to delve in the details of the bonding process, you can consult our extensive How to Get Bonded page for further information.
Do you need assistance with your bond application, or have more questions about getting bonded? Our experts are here to help. Just call us at (877) 514-5146.
How are bond claims managed?
The purpose of your auto dealer bond is to provide an extra layer of protection for the state of Vermont and for your customers. It can be used as a compensation mechanism in case you transgress from your obligations under the Vermont Statutes, or other applicable rules. A claim can be brought against you in such cases.
On proven claims, you are liable to provide a reimbursement to harmed parties up to the penal sum of your bond. This means a maximum compensation of up to $20,000 to $35,000, depending on the dealer bond amount you have posted. The surety that bonded you may cover the costs initially, but you have to repay it soon after. As a result, bond claims are to be avoided as they can cause a range of serious problems for your business.