10 Surety Bond Myths
Before you can set up your California-based dealership or remanufacturer operation, you will need to secure a surety bond or a dealer bond. This bond is designed to protect consumers from wrongful acts committed by the dealership or its employees. Chances are you may have some ideas about the function of a surety bond. To help you better understand these types of dealer bonds, we’d like to explain 10 surety bond myths.
1). The Surety Bond Protects the Buyer
Many dealers think that they are purchasing the bond to protect themselves or their dealership. The fact is that the surety bond is designed to help protect the state from being sued by the purchaser. However, in the state of California, the dealership is required to purchase the surety bond on behalf of the state.
2). Surety Bonds are Expensive
Some dealers think that they will have to pay somewhere in the five-figure range to secure a surety bond. The trust is that a surety bond costs a small fraction of the coverage amount. If you choose the right bond dealers such as 911 Bond, you can receive a dealer bond that is quite reasonable for new dealers or dealers with a smaller operation.
3). You Have to Pay Monthly For Your Bond
Many people think that a Surety Bond is like an insurance policy. With that misconception comes the idea that you have to pay monthly for your surety bond. The truth is that you only have to make one annual payment and then you are covered for the entire year. There are exceptions to this rule. For instance, if you are financing your bond, then you may have to make monthly payments. However, in most cases, you will only have to make just one annual payment.
4). There is One Flat Rate For Bonds
There is no one flat rate for a surety bond. The amount that you will pay for your bond will be determined by several factors. First, you will have to consider the size of your dealership operation. Additionally, your credit history and background as a dealer will play a factor. The bottom line is that if you are at a higher perceived risk, then you will pay more. On the other hand, if you are at a lower perceived risk, then you will pay less.
5). A Surety Bond Is the Only Bond That Your Dealership Needs
A surety bond is only designed to help protect the state in case of fraud committed by the dealership or employees. To protect your dealership, you will need to get additional bonds. For instance, you will need to get a Lost Title Bond as well as a Notary Bond. You will want to make sure that your dealership is protected from just about anything that could adversely affect your dealership.
6). A Surety Bond Can Travel From State to State
Some dealers think that their surety bond can travel from state to state. If you plan on moving your operations to another state or if you are looking to open a second dealership outside of California, then you will need to get a surety bond that is good for that state.
7). Only Large Dealerships Need Surety Bonds
The fact is that all dealerships in the state of California will be required to get a surety bond. Be sure to check with the latest rules in the state of California to know the minimum amount of bond that you need to maintain your operation in good standing.
8). A Surety Bond Is The Same As Insurance
A bond and an insurance policy are very different. Therefore, you will likely need to get insurance in addition to your surety bond. Also, an insurance policy is designed to protect you and your dealership with a surety bond is designed to protect the state.
9). All Surety Bond Companies Are the Same
Not all surety bond agents or companies are the same. Some will be better able to work with smaller dealerships while other bond companies can work with other operations. Also, a surety bond agent must be licensed to work in the state where they sell the bonds. Therefore, you should carefully research where you purchase your surety bond.
10). Only Those With Good Credit Can Get a Surety Bond
While your credit history will determine how much you will pay for your surety bond, you will not likely be rejected if you have less than perfect credit. Of course, you will likely pay more than someone with excellent credit. However, most surety bond agents will work with you. Contact Redline Dealer Education for more information.
Securing a Dealership Bond in Calfornia
Receive a quote for a dealership bond in California in less than 24 hours. Contact 911 Bond today at (800) 764-7233.