Here’s an interesting data point from the industry experts at the Auto Alliance: The average American vehicle is 11.6 years old, but the average vehicle in Oklahoma is just 10.1 years old. According to the data, Oklahomans replace their cars and trucks more often than the average person, making this a great state for auto sales. In fact, the auto industry accounted for almost $25 billion of sales in 2018 alone and employed over 73,000 people. If you’re eager to jump into this booming industry, you need an Oklahoma auto dealer bond first. This guide will show you exactly how to get one.
What Is an Oklahoma Auto Dealer Bond?
Most importantly, having an auto dealer bond is a requirement for getting an auto dealer license. If you intend to sell five or more vehicles within a 12-month period, you’re required to have a license. All states require bonds as part of the licensure process in order to protect the public from the risk of unscrupulous auto dealers. Essentially, bonds make auto dealers financially accountable if they break state laws or codes of conduct – like rolling back an odometer, for example. There are three parties involved in the bond agreement:
- Principal – The party that obtains the auto dealer bond and bears responsibility for paying any claims filed against the bond.
- Obligee – The party that requires the bond and has the right to file claims against the bond. In this case, the obligee is the Oklahoma Used Motor Vehicle and Parts Commission.
- Surety – The party that issues the bond to the principal. The surety agrees to pay for any claims (up to the bond total) if the principal is unable or unwilling to pay. However, the auto dealer is still legally obligated to reimburse the surety.
Who Needs an Oklahoma Auto Dealer Bond and Why?
Basically anyone involved with commercial vehicle sales needs a license and therefore also needs an auto dealer bond. That applies to used car dealers, wholesalers, dealer auctions, and crushers as well as manufactured home builders and dealers. Without a bond, it’s impossible to get an auto dealer license, and if the bond lapses then the license becomes invalid. Any dealer caught conducting business without a license faces penalties ranging from hefty fines to permanent loss of license or even jail time in extreme instances. Any of those consequences could be disastrous personally and professionally, which helps to emphasize why it’s so important to have an Oklahoma auto dealer bond at all times.
Steps to Get an Oklahoma Auto Dealer Bond
You need a bond before you can get a license, so it’s best to get started as soon as possible. Follow these steps:
- Choose a Surety Company – Ideally, the first surety you choose is one you can continue to work with for years to come. Look for one like Viking Bond Service that can offer the bond you need paired with the service you want. A good surety company will make the bonding process pain free, ensuring that everything is quick and easy so that you can focus on getting your license and running your business rather than worrying about your auto dealer bond.
- Fill Out Your Application – The bond application asks for some basic information about your background, your finances, and your business funding. Any business partners will also need to supply information, and the surety may ask for supporting documentation as well. Underwriters use the application to estimate your credit risk – meaning how likely you are to pay for claims or pay the surety back for claims it compensated on your behalf.
- Pay Your Premium – After evaluating your credit risk, the surety will quote you a premium price. Expect it to be a small percentage of the bond’s total value. Applicants with lower credit scores or other red flags will pay slightly more, but a good surety company will not deny them the bond they need to start their business. A good surety will also offer you a quote in under 48 hours so that you can satisfy the bond requirement without delay.
- Submit Your Paperwork – Your auto dealer bond becomes active once the premium is paid. The surety will provide you with an indemnity agreement (basically a bond contract) proving you have an active bond that meets all of Oklahoma’s requirements. You will need to submit a copy of this agreement with your auto dealer license application to prove you’ve met the bond requirement.
- Renew Your Bond – Bonds stay active for 12 months. Since you need an active bond at all times, you will need to renew it annually. That involves submitting an application similar to the one you submitted initially. Underwriters use the renewal application to re-evaluate your credit risk. If your credit situation has changed (positively or negatively) since your last renewed, your premium price could go up or down. Upon paying the premium, the bond becomes active for another 12 months.
Take the First Step Towards Getting a Bond
The first and most important step is partnering with the right surety company. Viking Bond Service already works with auto dealers across Oklahoma, and we’re excited to serve you too. Rely on us for comprehensive service, a speedy bonding process, and competitive premium prices, even for applicants with bad credit. Please contact us if you have questions. If you would like more information about bonds in general, consult this free resource that covers everything.