What Causes Dealer Bonds To Increase?

Have you been notified that your auto dealer bond amount has increased?

It's never fun having to purchase a surety bond, especially when you're required to pay more out of the blue.

So why does an auto dealer bond amount increase?

State Requirement Increase

Why Do You Need An Auto Dealer Bond Recap

Auto dealer bonds are required because every year there are a small number of licensed dealers who commit some form dealer fraud.

Examples of auto dealer fraud include actions such as:

• Lying about odometer readings or vehicle history
• Failing to deliver a vehicle title
• Creating a fake title to get a vehicle sold
• Failing to pay sales taxes on vehicles sold
• Plus potentially a lot more

The difference is these actions are committed on purpose to make more money by the dealer.

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It's because of these dealers that you are required to purchase a surety bond.

And this is also why bond amounts increase.

Increases In Fraud

If there are continual increases in fraud complaints by consumers, the state will reevaluate the bond amount.

Based the types of complaints, it's possible they may decide to increase the bond amount.

Keep in mind, this requires an amendment to an existing law, so the process is not immediate.

Inflationary Pressure

Because vehicles cost more and the damages of being harmed by a dealer can be greater, the bond amount needs to keep up with these rising costs.

State governments tend to updates bond amounts every 6 to 10 years.

Individual Dealership Increases

Some states have different bond amounts based on how many vehicles you sell during the previous calendar year.

If your business is growing and your helping a greater number of customers, the state will require a larger bond.

Essentially because you're working with more people, there is more risk that an negative event could happen.

These are the reasons why auto dealer bond amounts increase.