What Is a Wholesale Dealer Bond?
In the majority of states, wholesale auto dealers have to undergo a licensing process in order to start their operations. Typically, you have to provide a wholesale dealer bond, which is a type of license bond.
The goal of the wholesale auto dealer bond is to protect the interests of the state and of your customers. It functions as a safety net, guaranteeing your legal compliance. In case you transgress from applicable state laws, harmed parties can seek a financial compensation by bringing a claim against your bond.
This surety bond works similarly to the rest of bonds, including auto dealer bonds. It is a contractual agreement between three entities, with your wholesale auto dealership being the principal. The state licensing authority is the obligee. The third party is the surety, which is the bond provider.
Questions about Wholesale Dealer Bonds
Which states require a wholesale dealer bond?
Wholesale auto dealers need to obtain a surety bond in most states across the country. In some cases, there is a separate requirement for this license type, while in other states, the bond criteria are the same for new, used and wholesale auto dealers.
The Arizona Department of Transportation requires wholesale auto dealers to obtain a $25,000 surety bond.
The California Department of Motor Vehicles imposes a $10,000 surety bond requirement for wholesale dealers in the state.
In Maryland, wholesale dealers have to post a surety bond in an amount between $15,000 and $150,000. The licensing authority is the state Department of Transportation.
The Mississippi Department of Revenue requires wholesale dealers to obtain a $25,000 surety bond.
What is the bond cost?
The bond amounts for obtaining a wholesale dealer license vary between states. The surety bond cost is based on this required bond amount. It represents a small percentage of it, called the bond premium. The common rates are between 1% and 5%.
How exactly is your bond rice formulated? The most important criteria that your surety needs to consider include include your personal credit score, as well as business financials, liquidity and assets, and business experience. The more stable these factors are, the smaller the perceived bonding risk is, which reduces the bond cost.
|Surety bond name||Surety bond amount||Above 700||Between 650-699||Between 600-649||Below 599|
|Maryland||$15,000 to $150,000||$112.5-$2,225 to $1,125-$2,250||$150-$450 to $1,500 to $4,500||$375-$750 to $3,750-$7,500||$750-$15,000 to $7,500-$15,000|
|Arizona and Mississippi||$25,000||$187.5-$375||$250-$750||$625-$1,250||$1,250-$2,500|
What if I have problematic credit?
With Lance Surety Bonds, it is possible to obtain your wholesale dealer bond even if your finances are not perfect. We operate our Bad Credit Surety Bonds program for applicants struggling with issues like low credit scores, tax liens, bankruptcies, and civil judgements.
The bad credit bonding rates that you can expect are slightly higher because of the increased risk - in the range of 5% and 10%. Due to our excellent partnerships with numerous A-rated, T-listed surety companies, we are still able to get you bonded at the best possible conditions.
How do I get my surety bond?
For further details, you can refer to our extensive How to Get Bonded page. It will provide you with a thorough overview of the bonding process.
Lance Surety Bonds’ experts are here to help with your questions or bond application. You can contact us at (877) 514-5146.