Below are some of the more frequent questions we receive as an agency. If you have a specific question please do not hesitate to give us a call or email.
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- Auto Insurance
- Billing
- California Dealer Bond
- Claims
- Dealer Bonds
- Dealer Insurance
- Surety Bonds
- Used Car Dealer
- Wholesale Dealer
Although we can place a wide variety of bonds, Your Car Dealer Bond | Cal-Surety specializes in Car Dealer Bonds (aka Used Car Dealer Bonds or Auto Dealer Bonds), Vehicle Registration Service Bonds, Motor Vehicle Ownership Bonds (aka Defective Title Bonds) Car Wash Bonds, and California Immigration Consultant Bonds.
We know that you have a choice in which company you use for your surety bond services of California! And for that reason, we thank you for giving YCDB the chance to earn your business! Here’s a link that will help you through the surety bond process: https://cal-surety.com/auto-dealer-bond/
Your Car Dealer Bond has invested in technology that allows you to pay with an electronic check which makes the payment process nearly instantaneous. This technology allows you to literally take a picture of your check and text it to us or fax it to us if that is better. Of course, a scanned copy of the check can also be emailed to us or we can take a credit card payment to initiate your surety bond purchase.
You can always call one of our friendly staff members for assistance however, Your Car Dealer Bond will notify you approximately 30 days prior to your expiration date. Depending on your preference, you can make payment by check, debit card, and most major credit cards. Having more options is another reason more used car dealers are choosing YCDB as their preferred bond services of California!
Be sure to make payment prior to your bond expiration date in order to avoid cancellation and any associated fees.
We can issue surety bonds the same day as all documents and payment is received. Our proprietary process involves various methods to help speed things up just for you.
From the manner in which we can accept payment to the ability you have to track your incoming bond, Your Car Dealer Bond | Cal-Surety plain and simple makes things super easy for you.
This may be one of the key reasons we are one of the fastest local, family-owned surety bond services of California!
YCDB has various surety companies that can offer premium pricing to Permanent Residents. In most cases, we can have the rates back from 5 companies within 1 day. Give us the opportunity to earn your business by making things simple and inexpensive for you by leveraging our experience and technology.
We can help! Whether you’re a start-up or looking to renew your dealer insurance policy we want to make sure you’re in good hands. We’ve partnered ourselves with reputable insurance companies that specialize in auto dealer insurance programs. Our select group of insurance carriers understand the automotive dealer industry and offer coverages to provide optimal protection for your business. From simple-to-complex, we can help simplify the dealer insurance policy and conduct a thorough analysis of your business to detect all potential loss exposures. Based on their discoveries, we can help you develop a risk-mitigating strategy to minimize or eliminate your exposures.
Some of the car dealers that have been in the business for more than 5 years may refer to used auto dealer insurance as Garage Keepers Liability. The truth is that Garage Keepers coverage is just 1 of about 15 different coverages that are available to a policyholder. Garage Keepers Liability Insurance provides coverage for vehicles that are in the care, custody, and control of a used car dealer while the dealer doesn’t own the vehicle.
A good example of this exposure is the repair shops that take vehicles in to fix them but the vehicles are not owned by the dealer at this time. A better example is a test drive. What happens if you crash a car that you were test driving to see if you wanted to buy it? The car is not yours yet so your physical damage coverage (comprehensive and collision coverage) won’t cover it because that coverage only applies to vehicles if you own them.
For this reason, Garage Keepers Coverage was created to offer an additional layer of protection.
Garage Liability Insurance provides coverage for property damage and bodily injury resulting from the operations of an auto garage operation. It is the most common way for dealerships to reduce the financial impact of a risk occurring. Why go through the hassle of creating an awesome dealership business if you are not going to protect your investment?
Some insurance policies have started to parse out the exposures separately but both elements of loss can be covered under a used auto dealer insurance policy. In some policies, the deductibles can even be modified for a truly tailored insurance policy to fit your budget and risk tolerance threshold.
I wish I had better news for all you dealers looking to find every loophole in life. The reality is that every Personal Auto Policy has a whopping exclusion for commercial-type exposures. This means that the second that an accident happens, ownership of the vehicle will need to be proven.
The purchase documents will show that the vehicle was purchased by the dealership. (If it was purchased by the dealer as a private party, then the dealer as a person would have had to pay the sales taxes and DMV fees.) Once a dealer is established as the owner of the vehicle, a Personal Auto Policy will exclude all claims related to that vehicle.
The very nature of the auto broker side of the business dictates that the sales transaction needs to take place between a retail car dealer and a buyer. The auto broker helps source the vehicle to be purchased but never actually buys or sells the car or truck. So how could an auto broker be found liable for doing nothing more than making the introductions between buyer and seller?
The honest answer here is that there is not much exposure to auto brokers but dealer insurance is still a must if you want to sleep at night. Imagine that you arrange a buyer with a seller and a purchase is made! You get paid and you move on to the next transaction to set up. Now imagine that the sale that you arranged goes south for some reason and the buyer sues the dealership.
There isn’t a lawyer practicing law in the state of California that would hesitate for a minute from naming you in the suit since you were paid for your services.
Just to name a few: Garage Liability, Physical Damage, Garagekeepers Liability, Personal Injury, False Pretense, Title Errors and Omissions/Truth In Lending/Federal Odometer, Broadened Coverage, and Commercial Property.
To answer this question properly, I would need dozens of questions to be answered so we can get a sense of your risk appetite and what type of scenarios would keep you awake at night. Finding the balance between buying too much insurance or unnecessary coverages and not covering your assets properly is a fine line to walk. Let the experts help you today!
The California DMV insurance does not require proof of insurance to get or keep your used car dealer license. Even though it is not mandatory, getting insurance can save you quite a lot of trouble in your day-to-day operations.
Garagekeepers Coverage is designed to protect against claims arising from physical damage to vehicles owned by others that are left in your care, custody, or control. This includes vehicles that are being serviced, repaired, stored, and test-driven. This is an optional coverage that can be added to a used car dealer insurance policy.
We personally assist each of our insureds with a loss control survey in order to minimize or remove risk exposures.
In rare instances, collision losses affect more than one dealership vehicle at the same time. For example, let’s say a motorist loses control of their vehicle in front of your dealership and collides with six or seven dealership vehicles. With the aggregate deductible in place, it limits the amount a dealer pays in out-of-pocket deductible expenses for the loss.
Unfortunately, every personal auto policy has an exclusion for commercial-type exposures. This means that when an accident happens, ownership of the vehicle will need to be proven. The purchase documents will show that the vehicle was purchased by the dealership. (If it was purchased by the dealer as a private party, then the dealer as a person would have had to pay the sales taxes and DMV fees.) Once a dealer is established as the owner of the vehicle, a personal auto policy will exclude all claims related to that vehicle.
Garage liability insurance provides coverage for property damage and bodily injury resulting from the operations of an auto garage operation. It is the most common way for dealerships to reduce the financial impact of a risk occurring. Why go through the hassle of creating an awesome dealership business if you are not going to protect your investment?
Some insurance policies have started to parse out the exposures separately but both elements of loss can be covered under a used auto dealer insurance policy. In some policies, the deductibles can even be modified for a truly tailored insurance policy to fit your budget and risk tolerance threshold.
Among others, they offer Garage Liability, Physical Damage, Garagekeepers Liability, Personal Injury, False Pretense, Title Errors and Omissions/Truth In Lending/Federal Odometer, Broadened Coverage, and Commercial Property.
The very nature of the auto broker side of the business dictates that the sales transaction needs to take place between a retail car dealer and a buyer. The auto broker helps source the vehicle to be purchased but never actually buys or sells the car or truck. So how could an auto broker be found liable for doing nothing more than making the introductions between buyer and seller?
Your Car Dealer Bond | Cal-Surety created the Surety Bond FAQ exactly for this reason. We have a deep understanding of the insurance and bond business and enjoy imparting that knowledge to others that have questions!
The issuing governing entity controls whether a dealer bond is mandated and determines the required bond limit. The surety company issues a bond that is signed by their power-of-attorney, stamped with an embossed seal, and then notarized, thus validating it as an official document. Oftentimes bonds are required before business owners can get a license to operate in a certain city or state. It is important to note that the government entity issuing the license is provided the Dealer Bond and activate a claim against the bond if the licensee is not fulfilling the obligations voluntarily.
A Used Car Dealer Bond is a legal contract that guarantees and protects customers. The Dealer Bond promises to provide aid in the recovery of financial loss resulting from dealer fraud or unethical business activity. Most states require motor vehicle dealers to procure a Surety Bond in order to operate legally. The Bond also acts as a line of credit and assists in regulating the Dealer industry. An Auto Dealers Bond conveys credibility to both current and future customers.
The typical participants of a dealer bond are: Obligee – The government entity or individual requiring a “principal” to be bonded. Principal – The primary person who is required to be bonded. Surety – financial guarantor who assures the “obligee” that the “principal” can perform the task. Let our professional and highly-skilled staff support you through the most confusing part of the dealer licensing process. NOTE: The Dealer is responsible for reimbursement of any paid bond claim.
All states have a specific division created to deal with overseeing the licensed vehicle dealers doing business legally. In states like Arizona, this division is called the Motor Vehicle Department (MVD) and in states like California, dealers will recognize the name Department of Motor Vehicles (DMV). The majority of the DMV’s require there to be certain protections in place to safeguard the general public (or the retail transactions).
That said, not only will a used car dealer bond offer some type of recourse to a buyer who may have become the victim of fraud, but it will also provide protection to other dealers. The transactions done between 2 dealers are called wholesale transactions. The state of California will allow a private-party to sell 5 vehicles per year before they are required to obtain a dealer license (wholesale or retail).
The applicant must be approved by a surety bond company. The bonding company is making a promise to the obligee (the DMV in this case) that the dealer will follow applicable states and federal regulations and pay all their bills. You can apply for your surety bond seamlessly on our website. Regardless of your situation, we feel that you will really appreciate the high level of experience and the deep care we take with every dealer that comes our way.
This is the #1 most common question we receive even though it’s actually a DMV pre-licensing test question. The answer is a little complicated but hopefully, this makes sense. There is a carve-out in the law that allows a $10,000 bond for motorcycle-only retail dealers. The only additional exception is made for wholesale-only dealers that are selling less than 25 vehicles per year. All other wholesale, auto broker, or retail car dealers need a $50,000 bond.
Surety bond premiums vary due to the following reasons:
- Surety bond limit ($10,000 or $50,000 in California).
- Credit Score. The Experian Credit Score is what most surety bond carriers will rate your bond based in 2018.
- Application and Financial Credentials. Financials are usually not used for California Car Dealers thankfully.
- Whether you finance or pay in full. We have a payment option for some of our auto dealer bonds depending on the carrier that is writing that surety bond.
Bond premiums can range between 1% and 15% of the bond limit. Complete our quick and easy application today. It’s FREE!
The most common reason we see for a high-priced bond is the dealer not having established credit. In this scenario, no credit is basically the same as bad credit. There are a few reasons why folks don’t have established credit when they are getting their dealer license. Simply being young and not having loans that have been set up through a bank may be the most common. The other reason that is common with Used Car Dealers is that the individual likes to pay for everything with cash.
Some folks buy into the logic that they never want to buy anything that they can’t pay for on the spot. While that is a great approach, it doesn’t help establish credit. The process of building credit will take some time but getting a credit card with a very low limit can help quite a bit. Buy $25 – $50 worth of items every month and pay the card off within 2 or so weeks of the charges.
With about 6 months of this process, you will be in a good position to call your credit card company and ask them to increase your credit limit. Then keep doing the same thing. The fact that you have never been late on a single payment will look great. Also having available credit that you are not utilizing will also improve your overall credit profile.
You should see a nice increase in your credit score with this strategy and will be in good shape to renew your bond at a much-reduced cost as your Experian Credit Score improves.
Your Auto Dealer Bond should be active by the time you plan to see your DMV inspector to get licensed. For instance, if you place to the see the inspector on the 3rd Thursday of the month, your bond should be active on that Monday or Tuesday latest. Most dealers like to get the most for their money so they don’t want to pay for any dead time but this is strategy could save you as much as a week of time as you will read about in the next question.
The DMV inspectors workloads can vary quite a bit and on occasion. It’s usually as simple as that. The inspector will get through more work than they originally had scheduled and have some extra time. Why? Potential dealers often times submit incomplete packages that have to be bypassed. Imagine that you were originally scheduled for a Thursday appointment. But if your inspector has a break in their schedule, they may call you on a Tuesday to come in. This means if you have everything in order, you get licensed 2 days faster. This puts you at the action this week instead of next week!
The California DMV has a very specific carve-out in the law for wholesale-only auto dealers. The exception is meant to offer low-volume, wholesale-only dealers the opportunity to get lower limit auto dealer bonds. As a result, wholesale dealers save themselves some money. This is actually a question on the DMV Pre-Licensing test so most dealers already know this rule but it’s worth mentioning given how many times I hear this question. Wholesale Dealers that sell less than 25 cars/trucks per year can get away with the $10K surety bond. The only other carve out exists for Motorcycle-only dealers, regardless of retail or wholesale. Motorcycle-only dealers also have no sales caps in order to still qualify for the $10K bond.
No. The DMV is tracking the number of sales you are making here to determine the limit of the auto dealer bonds for wholesalers. The number of cars you purchased is not factored in. That said, if you are buying too many cars and not selling them, eventually the Board of Equalization (BOE) may start poking around to find out why. Why the BOE you ask? That vehicle was likely was purchased by you (the Wholesale-Only Dealer) and the BOE usually assumes that you will make a profit on the sale of that vehicle. If that vehicle was never sold, the Board of Equalization never gets to collect a tax on the profit you made on the auto sale.
This is very common for businesses that make their money from the vehicles they own will tend to see the benefit of obtaining a wholesale-only license. They get the same auction access and have very little overhead due since they are not dealing with the general public. The trick is not to cut any corners. Again, if you buy a vehicle under the dealer license then that vehicle should be sold to your other business. This allows the BOE to get paid on your profit and the DMV to get paid on the registration of that vehicle. That said, auto dealer bonds will still need to be purchased for $10,000 for those wholesale dealers and will need to be upgraded to a $50,000 bond before they sell that 25th vehicle.
Although the California DMV may be doing away with the Auto Broker designation altogether, Auto Brokers are still mandated to obtain a $50K auto dealer bond. the next question that most Auto Brokers have for me next is simply, why? While I agree that Auto Brokers never buy or sell a car as a Retail Auto Dealer would, they are still materially involved if they helped arrange a sales transaction and got paid for it.
Again, keep in mind the point of view of the Board of Equalization and the Department of Motor Vehicles. They both need to wet their beaks or they will eventually be banging on your door wondering how you could really be a business if you only buy but never sell vehicles. Remember the BOE needs to get paid on your profit and the DMV needs to get paid on the registration of that car (or truck). A good approach is to hold whatever car you like for 6 – 8 months and then sell it. With any luck, you will even be able to scrape a profit in the process. Most people in a position to do this for fun aren’t looking to make massive profits from this business model. They are content with just drive a beautiful car around for 8 months before selling it. Then having reconditioning, insurance, and maintenance associated with that vehicle be a business expense before selling it for a profit. Then rinse and repeat!
The protection that a surety bond provides is for your customers and partners, not for your business. It’s meant to safeguard the interests of the general public, other car dealers, and the lenders that provide financing for inventory.
No. The DMV is tracking the number of sales transactions to determine your car dealer bond limit. The number of cars you purchase is not factored in. That said, if you are buying too many cars and not selling them, eventually the California Department of Tax and Fee Administration (CDTFA) may start poking around. The reason is that vehicles you purchase as a wholesale dealer typically generate a taxable profit. If that vehicle was never sold, the CDTFA would never get to collect a tax on the profit you made on the auto sale.
An auto broker endorsement used to be the way to do that in California. However, the DMV is trying to eliminate this specific license type. That said, the auto broker business model is still alive and well! They still need to obtain a $50K auto dealer bond, though.
The California DMV has a very specific carve-out in the law for wholesale-only auto dealers. The exception is meant to offer low-volume wholesale dealers the opportunity to get lower-limit auto dealer bonds. Wholesale dealers who sell less than 25 cars or trucks per year can get away with the $10K surety bond. The only other carve-out exists for motorcycle-only dealers, regardless of retail or wholesale. Motorcycle-only dealers also have no sales caps to still qualify for the $10K bond.
Since the only carve-out in the California DMV law is for motorcycle-only dealers, you will need a $50K auto dealer bond if you are getting a license to sell vehicles directly to the public. Retail truck, trailer, RV, and boat dealers all need a $50K surety bond.
A bond is required of any dealer that is involved in the sale of motor vehicles such as new, used, wholesale, RV, motorcycle, auction, and other types of vehicles. In most states, dealers are even required to obtain a surety bond as a prerequisite for licensure.
Just apply online today with YCDB for a free quote. You will receive it in less than 8 business hours.
It is very important for you as a dealer to be aware of the circumstances that can bring a claim against your dealership. The safest way to avoid auto dealer bond claims is to maintain pristine paperwork, be transparent with your customers, and always stick to your legal obligations, which are set in the bond language.
You’ll need a separate car dealer bond for each state you want to operate in. Each state has different requirements for licensing and bonding, so you will have to oblige with the respective state regulations and get a separate bond for every state.
An auto dealer bond works as an extra level of protection for car buyers across the U.S. It’s a safe financial mechanism that guarantees you will follow the law in your work as a car dealer.
The bond is required by the authorities that license auto dealers in your particular location.
All types of dealers may need an auto dealer surety bond, depending on the licensing requirements of state or local authorities.
This means you are likely to need a bond if you fit into any of the following categories of dealers:
- New car dealers
- Used car dealers
- Retail car dealers
- Wholesale car dealers
- Car auction dealers
- Motorcycle dealers
- RV dealers
The cost of your car dealer surety bond is determined by how strong your personal and business finances are. Your personal credit score has the biggest impact on the price.
Your surety bond cost is a percentage of the bond amount you’re required to obtain by the licensing authorities. Applicants with credit scores of 650 and above can expect a bond premium between 1% and 3% of the bond amount.
The table below lists some of the most common dealer bonds that we sell. For each bond, you can check out the bond amount and the respective starting bond price.
The bond provides protection to your customers in a range of situations.
The most common cases when the bond coverage can be activated include:
- Breach of warranties
- Fraudulent financing schemes
- Title transference issues
- Misleading information about sold vehicles
- Interference with odometer readings
- Non-payment of sales tax or fees and inaccurate reporting
- Other potential breaches of dealer licensing requirements
In such situations, a harmed client or other parties can file a claim against the auto dealer bond to demand fair compensation.
Here’s how to obtain your dealer bond in a few easy steps:
- Complete our 5-minute application process online
- Receive a quick quote from YCDB in less than eight business hours
- Buy your bond with no hassle
Bad credit can be a serious hamper to getting bonded. The reason is that your credit score is one of the main factors in the bond cost formation.
At our family-run surety agency, we know that it’s difficult to run a dealership when you’re facing financial issues. That’s why we offer dealers the ability to obtain the necessary bond even if they’re struggling with bad credit by opting to set-up convenient payment plans.
The licensing process for dealers across the country varies because it’s set by different licensing authorities on the state or local level.
You’ll typically have to provide a set of documents, including:
- Business entity registration documents
- Training or examination proof
- Tax and/or IRS registration
- Insurance policy (requirements are set at the individual state level)
This is not an easy answer. Different insurance companies will have different formulas on determining your insurance premium; one of which can be claim frequency and severity. It is our recommendation to discuss your specific claim with our claims manager to see if turning in a claim makes sense. However, all possible liability claims need to be turned in; as the insurance company needs to be put on notice.
An adjuster is a representative of the insurance company that helps settle a claim. They are not employed by us. We do not settle claims as this is done by the adjuster. However, we will assist in making sure a covered claim is paid fairly and promptly.
Yes, it is the State law for all owners of a vehicle to have auto insurance. It is your choice if you wish to insure for physical damage if there is not a lender involved.
Broad form collision allows you to not have to pay your deductible if you are not deemed at fault in an accident. There are also options to choose “regular” and “limited”. These options should be discussed with your agent.
All payments should be directed to the insurance company unless specifically stated by your representative. Please see our “billing” section if you wish to pay by phone or have a question on your billing account.
