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The state of Michigan requires certain motor vehicle dealers to obtain an auto dealer surety bond as part of the process of becoming licensed to do business or renewing an existing business license. The bond is the dealer’s guarantee to operate within all rules and regulations governing auto sales in the state. If they break the terms of the bond, they can be held responsible for making whole any consumer who suffers a financial loss as a result. The bond serves to protect the state, consumers, and the reputation of the industry.
Bond Penalty Amount: $10,000
Bond Term: 1 year
Bond Expiration Date:Varies
Who Needs Them?
This bond is required by the Michigan Secretary of State for all new car dealers, used car dealers, and brokers wishing to obtain a license with the state.Any person that buys, sells, brokers, leases, negotiates a lease, or deals in 5 or more vehicles in a 12-month period is required by the State of Michigan to maintain a dealer license.You must maintain a bond at all times in order to keep a valid Michigan dealers license.
How Do They Work?
The Michigan Bureau of Driver and Vehicle Programs has established $10,000 as the required amount of all auto dealer bonds. This is the maximum amount (the full penal amount) to be paid out on a claim against the bond.
Any consumer who suffers a financial loss as a result of the dealer’s unlawful or unethical actions may file a claim against the bond. Once a claim is filed, the surety will conduct an investigation. And once they are certain of the claim’s validity, they will pay it on behalf of the dealer. This expedites resolution of the claim and compensation for the consumer—but the dealer is still legally responsible for the consumer’s loss and must reimburse the surety.
What Do They Cost?
Dealers pay only a small percentage of the $10,000 bond amount as the premium for an auto dealer bond. The premium rate is determined by the surety on a case-by-case basis. Several factors enter into the underwriting decision, but the primary one is the dealer’s personal credit score. The better the credit score, the lower the premium rate.
You can expect to pay anywhere between 1% to 5% of the bond penalty amount if you maintain good credit.For individuals with lower credit ratings, we can still offer the most competitive premiums with financing sometimes being an option.
Use our convenient online system to get a quote for a Michigan auto dealer bond. Or call to speak with one of our experienced surety bond professionals.
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