4 Reasons Why Colorado Auto Dealer Bonds Are Useful

Anyone who regularly sells vehicles in the Centennial State needs to have a Colorado Auto Dealer Bond. It’s a legal requirement that carries strict penalties if broken. But a bond is also an asset that protects you, your business, and your customers. Learn what kind of bond you need to operate legally and explore how to use it to your advantage.

What is a Colorado Auto Dealer Surety Bond?

Colorado state laws dictate how auto dealers are allowed to operate their business. These laws exist to protect the interests of consumers from unscrupulous auto dealers. If the laws are broken, bonds are designed to help resolve the damage


Here’s how they work: Anyone in Colorado who sells more than three cars per year is required to have a surety bond amounting to $50,000 (the amount you actually pay is far less). When a state law applying to auto dealers is broken, the Colorado Motor Vehicle Dealer Board issues a fine. If the dealer does not pay it themselves, the surety company that issued the bond pays the fine, up to the total bond amount. Afterward, the surety company attempts to collect the fine amount from the auto dealer who owns the bond.


One way or another, the auto dealer is ultimately responsible for any fines levied against them. Colorado auto dealer bonds exist so that if a dealer can’t or won’t take responsibility, the state and the citizens it serves are still compensated.

Why is a Colorado Surety Bond Good for Auto Dealers?

Just because something is a legal obligation, it doesn’t mean it can’t be a business resource as well. Auto dealers with the right perspective on the situation can use the bond to help build their business. Here are four examples:


Auto Bonds Hold the Industry to High Standards

The stereotype of the shady used car salesman may be untrue, but it persists. The unfortunate fact is that people tend to be suspicious of auto dealers, and many of them have had a negative experience with a car dealer before. The only way to overcome this stereotype is for everyone in the industry to commit to the highest standards of ethics and service.


Requiring everyone to have a Colorado Motor Vehicle Surety Bond helps to regulate the industry by holding everyone financially accountable for misdeeds. Since auto dealers must purchase the bond before selling any cars, they have a personal financial incentive to follow the letter of the law when dealing with customers. The bond requirement means there is no way to wrong customers and avoid penalties. Ultimately, that helps boost consumer confidence and promote more vehicle sales over time.


Bad Auto Dealers Can’t Enter the Industry

Auto dealer bonds are only issued to people who have adequate credit and can pay the associated fees. The requirement exists, in part, to keep people who are financially unqualified out of the industry. Essentially, the only people who can get a license to sell motor vehicles in Colorado are those with the means to run a business.


This is good for everyone in the industry because it helps to keep bad actors out. With fewer unscrupulous auto dealers to worry about, consumers start to trust the industry more. The bond requirement also helps to limit competition. Without this barrier to entry, the market would be saturated with auto dealers with less-than-stellar credentials.


Auto Dealer Bonds Make for Great Advertising

Being bonded is a sign that both the state and the surety company trust the auto dealer to operate honestly. It’s a vote of confidence that speaks volumes about a dealer’s ability to meet expectations and carry through with commitments.


Instead of treating the bond as just an administrative obligation, emphasize it in advertising campaigns. Don’t get lost in the weeds of trying to explain the details of a Colorado auto dealer surety bond. Instead, emphasize the message that being bonded means consumers are protected. In the auto industry especially, consumers want to know that when something goes wrong, a solution is available. Auto bonds help to underline that point.


Bond Renewals Encourage Long-Term Financial Planning

Auto dealers must have a bond for as long they’re licensed to sell cars in Colorado. The bond is renewed on a regular basis, typically annually, and premiums must be paid each time. Dealers may only have to pay several hundred dollars out of pocket in premiums, but this is on top of all the other ongoing expenses dealers face.


Knowing the bill is coming encourages auto dealers to set aside the funds in advance, possibly as part of a systematic business planning effort. Also, since the cost of the bond is based on the auto dealer’s credit score, there is a powerful incentive to elevate that score and pay less. In a small but overlooked way, Colorado motor vehicle bonds actually help entrepreneurs manage their money.


Viking Bond Service can help you obtain a bond that meets all the requirements of the Colorado Motor Vehicle Dealer Bond. The application is easy, and approvals come quickly, even for people with poor credit. Get started now to begin selling vehicles sooner.