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Alabama Motor Vehicle Surety Bond

In Alabama alone there are over 270 new car dealerships and even more used car dealerships. Collectively, these businesses account for north of $12 billion in annual sales, making this an appealing industry to get into. If you have aspirations to open a dealership of your own, make sure you understand the bonding requirement.

What is a Alabama Motor Vehicle Bond

Alabama requires all motor vehicle dealerships to obtain a bond before they can legally sell vehicles. The bond essentially makes the auto dealer financially responsible if the dealership violates state laws or codes of conduct regarding vehicle sales. When this happens, the Alabama Department of Revenue's Motor Vehicle Division may file a claim against the bond seeking compensation. The bonded party must pay for all valid claims, meaning motor vehicle dealers can't escape responsibility for bad business practices.

How does an Alabama Motor Vehicle Surety Bond work?

When the state of Alabama believes a motor vehicle dealer has violated the state laws, it can file a claim against the bond for damages to individual consumers or the state itself. The surety will investigate the claim, and agrees to pay for any valid claims that the bonded party (the motor vehicle dealer) refuses to pay. The surety acts like a line of credit to cover the bond auto dealer's debts, but like all credit, it must be paid back. One way or another, the bonded party always has the final financial responsibility for claims.

Who should get an Alabama Motor Vehicle Surety Bond?

If you intend to sell five or more new or used vehicles within a 12-month period, you will need a bond before making your first sale. Since bonds protect consumers and the state, dealerships must have them before being granted a license to sell vehicles. Therefore, put obtaining a bond high on your list of priorities. And when you need to secure one fast, rely on Viking Bond Service.

Who are the parties involved in an Alabama Auto Dealer Bond?

All surety bond agreements involve three equal parties:

  • Principal - The motor vehicle dealer, the bonded party, and the person responsible for settling valid claims.
  • Obligee - The state of Alabama, the bond beneficiary, and one with the right to file claims against the bond.
  • Surety - The company that issues the bond, investigates the claims, and agrees to settle claims when the principal cannot. When the surety pays, however, the principal must settle the debt potentially with interest and fees added.

How much does an Alabama Motor Vehicle Surety Bond cost?

Alabama requires anyone involved in vehicle sales - new, used, wholesale, reselling etc - to obtain a $25,000 bond, meaning the surety backing the bond agrees to pay up to $25,000 to settle claims. For the motor vehicle dealer, the cost (known as the premium) is a small percentage of the total. The surety determines the exact amount based on the bond applicant's credit and financial history. The typical price range for these bonds in Alabama is from 1% - 3% of the bond amount.

How are claims handled for Alabama Motor Vehicle Bonds?

The surety will investigate any claims it receives until it can prove the validity. At that point, the principal has the opportunity to settle with the obligee and avoid further financial penalties. If they don't, however, the surety steps in to pay, and then has the right to collect that same amount (plus interest and fees) from the principal who was unable or unwilling to pay earlier.

Alabama Motor Vehicle Surety Bond Terms and Expiration Dates

In Alabama, the term for motor vehicle bond lasts from October 1st to September 31st. All bonds must be renewed by October 31st. To renew, you simply submit updated financial information to the surety, which they will use to re-evaluate your credit risk and potentially raise or lower your premium. Once the renewal premium is paid, the bond becomes active for another 12 months.

How to apply for an Alabama Motor Vehicle Bond?

Simply complete a bond application and turn over any other documents the surety requests. When you apply with Viking Bond Service, you can expect to get a quote back within 24 hours of a completed application, making it fast and easy to get the bond your dealership needs to get off the ground.

Viking Bond Needs - Serving Dealerships Throughout Alabama

You can't afford to work with the wrong surety brokerage, but you can't delay getting a bond either. Work with a team of nationwide experts capable of getting you a bond at an affordable rate in no time at all. Complete our online bond application at any time to get the process started. Or reach out to our team through the contact form on this page or by calling 888-278-7389.

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