New Surety Bond Requirements for Used and Wholesale Motor Vehicle Dealers in Mississippi
House Bill 1000 introduces changes in the surety bond requirements for used car dealers and wholesale motor vehicle dealers in the state. It has already been signed by Governor Phil Bryant, and it’s been effective since July 1st.
Until now, only new motor vehicle dealers were required to post $25,000 auto dealer bond in order to obtain a dealer license. With the new bill, this rule extends to used and wholesale dealers too.
Additionally, the new legislation allows dealers to post a $100,000 bond to cover multiple selling locations. It also stipulates that wholesalers need to post a $15,000 bond to secure their role in collecting taxes as designated agents of the Department of Revenue.
To give you a better idea what these legislative changes mean for Mississippi dealers, let’s take a tour the new bonding rules, their effect on the industry, and get a quick refresher course about the way surety bonds work.
The new bonding requirements in Mississippi
The new bill HB 1000 brings a higher level of coherence to the rules for auto dealers in Mississippi. Previously, only new car dealers were required to post a $25,000 bond as a guarantee that accompanies their dealer license application. Today, this requirement is extended to used car dealers and wholesale motor vehicle dealers as well.
Since this new bonding requirement might be financially burdening for dealerships with multiple locations across the state, who would need to post a $25,000 used car dealer bond for each of them, the bill offers an alternative. They can provide a blanket $100,000 bond, which covers all their locations in Mississippi.
The last bonding change relates only to wholesale dealers in the state. They can act as agents of the Department of Revenue and take the role of collecting the applicable taxes in their business operations if they furnish a $15,000 bond.
What does it mean for your dealership?
However, if you have to obtain a $25,000 bond, you need to pay only a percentage of it, which is called the bond premium. If your overall financials and credit score are in good shape, you’re likely to pay between 1% and 3% of the total bond amount for your bond. This means your surety bond cost will be anywhere between $250 and $750.
While this is indeed an extra cost for used and wholesale dealers, obtaining the new bond will also mean a higher level of security provided by your dealership. This naturally raises the trust of customers, as they know they can safely do business with you.
The new rule fosters a more regulated environment and brings higher costs, but this is a step in the direction of raising the bar for all dealerships across the state. Ultimately, this could help the industry in Mississippi to boast higher standards and better services.
Surety bond? What’s that again?
In case you haven’t worked with bonds before, you might be wondering what is a surety bond exactly?
An auto dealer bond is a three-party agreement between your dealership as the principal, the state of Mississippi as the obligee requiring the bond, and the surety which underwrites the bond, and vouches for your business.
The bond is an extra layer of protection for the state and its citizens, that your dealership will act in accordance with the applicable rules and regulations governing the selling of motor vehicles. In case you violate these rules, a claim can be made on your bond. If it’s proven, your surety provider will cover all costs up to the penal sum, thus guaranteeing that the obligee is protected.
However, you’re obligated to repay the surety on a later date, which means the costs fall on your dealership in the end. That’s why it’s a wise idea to avoid claims and make sure to stick to your contractual obligations.
While it might seem like an extra chore, familiarizing yourself with surety bonds is an excellent first step for you and your dealership, so that you can stay on top of the licensing game.
If you have any questions, don’t hesitate to call us at 877.514.5146. If you’re ready to start your bonding process and stay compliant with the new rules, it’s never been easier to get a free bond quote online within minutes!