Auto Dealer Insurance Needs
California Department of Motor Vehicles requires anyone who wants to be a vehicle dealer to get a Dealer Bond. There are different bonds required depending on several factors.
- New Car Dealer ($50,000 Dealers Bond)
- Used Car Dealer ($50,000 Dealers Bond)
- Wholesale Car Dealer ($10,000 Dealers Bond)
- Motorcycle Dealer ($10,000 Dealers Bond)
- Recreational Vehicle Dealer ($10,000 Dealers Bond)
California also requires your dealership to obtain a General Liability Policy.
What is an Auto Dealer Bond?
The auto dealer bond is a legally binding agreement that you will follow the law when dealing with your customers. If you violate the law, the customer can make claims against the bond which you are required to pay.
What does an Auto Dealer Bond cover?
Your surety bonds do not protect you, they protect your customers. Committing fraud or break the rules for auto sales allows the customer to make a claim against your bond. You must pay the claims and if you cannot pay the claim, the surety company will cover it. When the bond company has to pay the claim, they will cancel your bond and this will close your business.
What is the cost of an Auto Dealer Bond?
Actual cost to you is a percentage of that bond. Determined by your credit score, This percentage is from 1% to 10% of the total bond. The surety company may also vet your dealership experience in determining costs.
Things like tax liens and unpaid collections will weigh in how much your bond will cost. An example of auto dealer bond cost is $250-$1000 for a $25,000-$50,000 bond.
Auto Dealer License Bonds put you at risk.
California DMV Dealer license requires you to pay off all claims against your bond. This can be up to, and including legal fees, the amount of your bond premium. The state will leverage your personal holding and company holding if you do not pay. It is highly recommended that you incorporate your dealership. This will help protect your personal assets from the claim.
Other insurances required by the State Of California
- Workers Compensation: Small businesses with any non-owner employees are required by CA state law to have workers comp insurance coverage.
- Business Auto: If the business owns any vehicles (titled to the business), those cars or trucks must require commercial auto insurance.
While these are the only ones required, there are many others you should consider. California does not have a rewards cap for liability lawsuits. Business owners should invest in this liability coverage. California is known to reward large liability judgements against commercial businesses. The injured party has up to two years to file a claim.
These are the commercial insurances available:
- Business Owners Policy
- Commercial General Liability
- Commercial Property
- Commercial Umbrella
- Directors And Officers Liability
- Employment Practices Liability Insurance
- Equipment Breakdown
- Professional Liability (E&O)
- Workers Compensation
- Business Auto
- Commercial Crime
- Cyber Liability
- License and Permit Bond
These types of insurance protect businesses in a litigious climate. Any or all of the above coverages can help you with a financial loss.
Steps to getting your Auto Dealers License in California
The state will require a background check on every type of auto dealers license. If you have any arrest conviction, file an abbreviated application to the state. Filing application requires a $175 application fee. This could save you a considerable amount of money and aggravation.
The full application will require:
- Auto Dealers Surety Bond or Car Dealer Surety Bond
- Business Insurance
- Physical Place Of Business
If your license is denied you will have to cancel and absorb all the above costs.
Here is the official California auto dealer licensing requirements:
New Auto Dealer Application Checklist and forms
Used Auto Dealer Application Checklist and forms
Other useful Auto Dealer Forms
- Application for sales person
- Auto dealer license renewal
- Application for title And registration
- Application for paperless or duplicate title
- Bill of sale
- Lien Satisfied/Legal Owner/Title Holder Release
- Notice of Transfer and Release of Liability
- Vehicle Emission System Statement (Smog)
Sarkhosh Insurance Agency
Here at Sarkhosh Insurance Agency, we have been serving California residents for thirty-three years. We have the knowledge of the auto dealers insurance needs. Dealing with all insurance carriers, we can supply your dealership with custom crafted insurance solutions, help with bond guaranteeing and motor vehicle dealer bond at the very best prices.
Click Here for your personal consultation.