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Auto dealer bonds are a type of license and permit bond that motor vehicle dealers must purchase in order to become licensed to do business in Missouri or to renew an existing license. They protect the interests of the state and of dealership customers.
Both new and used car dealers in Missouri are required to obtain an auto dealer bond in the amount of $50,000 at the time they apply for or renew their license. All Missouri dealer licenses expire on December 31 of each year and can only be renewed if there is an active bond in place.
The Missouri Motor Vehicle Bureau, Dealer Licensing Section is the obligee requiring the purchase of an auto dealer bond. The motor vehicle dealer is the principal in the bond agreement, and the company that issues the bond is the surety.
Failing to comply with the terms of the bond agreement can result in a claim being filed against the bond. Any party suffering a financial loss as the result of the dealer’s actions can file a claim. The surety will conduct an investigation to ensure that a claim is valid before paying it.
While the surety will pay claims on behalf of a bond principal, that is merely a courtesy intended to expedite payments to the claimant. The indemnity clause included in the bond contract makes the principal (the dealer) legally responsible for reimbursing the surety for the full amount paid out to a claimant.
The premium cost you will pay is only a small percentage of the required $50,000 bond amount. When determining the premium rate, the primary factor the surety will consider is the applicant’s credit score. You may also be asked to provide financial statements and proof of your industry experience.
Those with good credit typically pay a premium rate of 0.5-5% of the bond amount, or $250 to $2,500 annually. Applicants with poor credit will typically pay a higher premium. We strive to keep premiums competitive even for applicants with poor credit.
The Missouri Motor Vehicle Bureau establishes the requirements for auto dealer licensing. For a guide to the dealer licensing process in Missouri, view our blog post here.
Give us a call to discuss your need for a new Missouri auto dealer bond, or apply through our convenient online form.
