The Growing Need for Motor Vehicle Dealer Bonds
Whether it be a used-car dealer masking a vehicle defect from a customer, or a new vehicle dealer taking advantage of car buyers via overly excessive prices, threats certainly exist for today’s new and used car buyers. Additionally, the growing number of “chop shops”(garages that illegally modify/resell stolen vehicles) nationwide is additional cause for concern. While these types of instances are clearly the minority, unfortunately it’s always the corrupt few that cause the greater masses of honest business owners to endure necessary control measures.
How can these threats be mitigated?
Amidst this growing threat to consumers, states and municipalities have responded with new, stricter laws governing the sale of automobiles (new and used). Such laws have been designed to protect consumers from misrepresentation and fraudulent activity by auto dealers. As is the case with many other commercial bonds, these laws require motor vehicle dealers to become licensed in their state of operation and also to obtain either a used car dealer bond or a motor vehicle bond (also known as an auto dealer bond) in order to ensure they comply with the applicable laws.
What exactly does a motor vehicle dealer bond guarantee?
As you’d likely infer, the state or municipality requiring the surety bond is the obligee, while the vehicle dealer is the principal. These types of surety bonds guarantee that new and used vehicle dealers will provide purchasers of vehicles with a clear title to the vehicle, and that dealers will not partake in fraudulent activities that could mislead or deceive customers. These guarantees apply to not only the auto dealers but their sales force as well.