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Like most other states, South Carolina requires motor vehicle dealers to purchase a surety bond as part of the process of obtaining a business license. This bond is known as a motor vehicle dealer bond, or auto dealer bond.
The purpose of these bonds is to ensure that auto dealers abide by all relevant state laws (those contained in Title 56 of the South Carolina Code of Laws) and to protect consumers against financial loss if they don’t.
Bond Penalty Amount: $30,000
Bond Expiration Date: Varies/Yearly
Who Needs Them?
There are two tiers of auto dealer bonds in South Carolina:
Motor Vehicle Wholesale License. Wholesalers, motorcycle dealers, dealers who sell travel trailers, and wholesale auction dealers all must purchase bonds with a required bond amount of $15,000.
Motor Vehicle Dealer’s License. The required bond amount for other motor vehicle dealers is $30,000.
How Do They Work?
Every South Carolina dealer bond is a contract between three parties:
The obligee, the party requiring the bond, is the South Carolina Department of Motor Vehicles
The principal, the party required to be bonded, is the motor vehicle dealer
The surety is the company that underwrites and issues the bond
The terms of the bond specify the actions that can result in a claim against the bond. In the event of a claim, the surety will conduct an investigation to determine whether it is valid. Although the responsibility for paying the claim ultimately belongs to the dealer, the surety will pay the claimant initially and give the dealer some time to repay that amount. It’s not insurance, so the dealer’s signature on the bond agreement means that they are ultimately responsible for repaying any claims.
What Do They Cost?
The premium the dealer pays for an auto dealer bond is only a fraction of the $15,000 or $30,000 bond amount. The most important consideration in the bond underwriting process is the dealer’s personal credit score, supplemented by personal and business financial statements if requested by the surety.
You can expect to pay anywhere between .625% 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. That’s $94-$750 for a $15,000 bond or $188 to $1,500 for a $30,000 bond.
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