To become a licensed auto dealer in Minnesota, you'll need to obtain a dealer bond. This bond is required by the state's Department of Motor Vehicles and serves as a guarantee that you'll comply with all state regulations.
The cost of a Minnesota auto dealer bond varies depending on the type of license you're applying for. For example, a new dealer bond can cost anywhere from $5,000 to $50,000, while a used dealer bond may be cheaper, costing between $2,000 and $20,000.
Minnesota law requires auto dealers to have a minimum of $25,000 in surety bond coverage. This ensures that you'll be able to compensate customers for any losses they may incur due to your dealership's actions.
To obtain a Minnesota auto dealer bond, you'll need to work with a licensed surety bond company. These companies will assess your creditworthiness and determine the premium you'll need to pay for the bond.
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What is an Auto Dealer Bond in Minnesota?
An auto dealer bond in Minnesota is required as part of the application process for the Motor Vehicle Dealer License.
The bond ensures that the public will receive compensation for financial harm if the auto dealer fails to comply with the licensing regulations.
Minnesota auto dealer bonds protect the state and those who do business with a licensed Minnesota motor vehicle dealer against financial losses stemming from the dealer's malfeasance.
The bond serves as a dealer's pledge to comply with the laws and regulations that govern auto trading in Minnesota, which helps prevent unlawful or unethical business practices.
A Minnesota auto dealer bond provides a source of funds for compensating those who have a legitimate claim for damages caused by the dealer's failure to live up to that pledge.
Minnesota Statutes 168.27 mandates auto dealers operating in the state to obtain a motor vehicle dealer license with the DVS, and a bond is required to be eligible for licensure.
Dealers must purchase and maintain either a $50,000 or $5,000 motor vehicle dealer surety bond to be eligible for licensure.
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Getting an Auto Dealer Bond in Minnesota
Getting an Auto Dealer Bond in Minnesota is a relatively straightforward process. You can start by logging into your account on BondExchange and using their keyword search to find the "auto dealer" bond in their database. If you don't have a login, you can gain access now and let them help you satisfy your customers' needs.
To apply for your bond, simply complete the online application, which is a fast process that begins when you do so. You'll receive a quote soon after submitting the application, and you can finalize your purchase by paying the premium online.
Getting a quote is quick and easy, taking only a couple of minutes to apply online. You'll get an immediate, no-obligation quote from BondExchange, and if your situation is more complex, you'll get a bond quote within 48 hours.
To get a quote, you can apply online or contact BondExchange's friendly experts for help. You can reach them by phone at (877) 514-5146 or by email. Alternatively, you can call them at 1-800-608-9950.
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The process of becoming bonded and insured is explained in detail on the BondExchange website. If you'd like to get started, you can request a motor vehicle dealer bond quote on their website. This will take only 2 minutes, and there's no obligation to proceed.
The Minnesota Department of Public Safety's Dealer Unit is responsible for processing motor vehicle dealer license applications. To get your license, you'll need to provide several required documents, including a $50,000 surety bond, a franchise agreement, and proof of liability insurance.
Here are the required documents and fees for a motor vehicle dealer license in Minnesota:
The application fees for a motor vehicle dealer license in Minnesota are as follows:
To file your bond, you'll need to provide the legal name and location of the entity or individual buying the bond, the bond amount, and the type of business. You'll also need to provide the surety company's name, address, phone number, and signature, as well as the surety agent's name, address, and signature. The bond form should be mailed to the following address:
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Cost and Requirements
The cost of an auto dealer bond in Minnesota can vary depending on your credit score and other factors. The bond amount is $50,000.
You don't need to pay the full price of the bond, but rather a premium of 1% to 10% of the required bond amount through an authorized surety company. The rate you qualify for is based on your credit score, professional experience, and assets.
Customers with a credit score of 700 or higher receive a premium rate of 1% to 3%. Those with a score of 600 to 699 will receive a premium rate of 3% to 5%. Applicants with a credit score of 599 or lower will receive a premium rate of 5% to 10%.
The cost of the bond can also be broken down by credit score range:
The annual premium for a Minnesota auto dealer bond is a small percentage of the bond's penal sum, typically ranging from 1% to 4% of the required bond amount.
Insurance Requirements and Process
To obtain a Minnesota Auto Dealer Bond, you can use a keyword search on BondExchange's database to find the "auto dealer" bond. Simply login to your account or gain access now to get started.
The State of Minnesota requires dealers to maintain liability insurance on all vehicles with dealer plates with limits outlined in Step 4.
Dealers must also file either a $50,000 or $5,000 motor vehicle dealer bond.
You can contact BondExchange's friendly underwriting staff by phone (800) 438-1162, email, or chat from 7:30 AM to 7:00 PM EST to assist you with the bonding process.
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Maintaining and Renewing the Bond
To prevent the suspension of your dealer license in Minnesota, you must maintain your surety bond. The bond may run continuously or have a fixed expiration date.
You're responsible for paying the bond premium annually for both continuous and fixed term lengths. We will notify you about the renewal options and process each year.
Your dealer bond will have to be renewed 12 months from this date.
As your expiration date approaches, your bond specialist will contact you 30 to 45 days in advance with pricing ready to go so the renewal process is seamless.
Once you pay the renewal premium, you don't have to do anything else. Your bond is active and you can continue selling vehicles.
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Avoiding Claims and Other Products
To avoid claims on your Motor Vehicle Dealer Bond, it's essential to follow all dealer regulations in Minnesota. You must pay sellers of vehicles promptly and in full.
Fraudulent activities, such as engaging in or allowing representatives to engage in acts of fraud, can also lead to claims. This includes any illegal selling practices.
To stay on top of your tax obligations, consider setting aside tax payments as they accrue. Paying taxes on time and in full is crucial to avoiding claims.
Here are some key issues to keep in mind:
- Do not engage, or allow representatives of the business to engage, in any acts of fraud
- Pay sellers of vehicles promptly and in full
- Transfer all vehicle titles when sold
- Pay taxes on time and in full
- Do not engage in any illegal selling practices
Avoiding Claims
Avoiding claims is crucial for any business, and it's especially important for auto dealers in Minnesota. To avoid claims on the Motor Vehicle Dealer Bond, dealers must follow all dealer regulations in the state.
Fraudulent activities are a major cause of claims, so it's essential to avoid engaging in or allowing representatives of the business to engage in any acts of fraud. Paying sellers of vehicles promptly and in full can also help prevent claims.
Dealers must also transfer all vehicle titles when sold, which is a simple but important step. Paying taxes on time and in full is another key requirement, and dealers should consider setting aside tax obligations as they accrue.
Dealers should also be aware of illegal selling practices and avoid engaging in them. By following these simple steps, auto dealers in Minnesota can minimize their risk of claims and protect their business.
Here are some key requirements to keep in mind:
- Pay sellers of vehicles promptly and in full
- Transfer all vehicle titles when sold
- Paying taxes on time and in full
- Avoid engaging in or allowing representatives of the business to engage in any acts of fraud
- Avoid engaging in any illegal selling practices
Other Insurance Products for Agents
As an agent, it's essential to offer your clients a comprehensive range of insurance products to protect their business and assets.
Minnesota requires dealers to obtain comprehensive liability insurance on all vehicles with dealer plates.
If you provide towing or service station services, you should also consider obtaining garage keepers liability insurance.
Some dealers may also be required to obtain workers’ compensation insurance.
Our agents often utilize brokers for liability insurance, and a list of brokers in this space can be found here.
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Frequently Asked Questions
How much is a 20,000 auto dealer bond?
The cost of a $20,000 auto dealer bond can range from $150 to $2,000, depending on your credit score. With good credit, you can expect to pay between 0.75% and 3% of the bond amount.
How to make a claim against a car dealer bond?
To make a claim against a car dealer bond, file the claim with the surety that issued the bond, which will then investigate and potentially reimburse you for losses if the claim is valid. Start by contacting the surety company listed on your bond documents for next steps.
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