Texas Motor Vehicle Dealer Bond

Prior to applying for a dealership license, a dealership owner must provide proof of a motor vehicle dealer bond. Dealership owners can learn more about bond requirements in their state by contacting a surety agency.

A motor vehicle dealer bond covers losses incurred by customers because of fraudulent or unethical practices of the dealer. This includes losses resulting from deceptive advertising, failure to deliver a vehicle as promised, failure to get a clear title for the vehicle, misrepresenting the condition of the vehicle, or other fraudulent conduct.

If a motor vehicle dealer cannot secure a bond, they will not be able to operate their dealership legally. Depending on the state, the dealer may be subject to fines and other penalties and will be unable to access necessary resources such as financing and title services.

Each state’s legislature writes license laws that govern auto dealers, usually through the DMV. The government enforces the law by requiring dealer education programs, background checks, and surety bonds. A surety bond protects the public if the dealer fails to follow the law.

A motor vehicle dealer bond typically lasts one year, at which time it must be renewed. The surety company may require the dealer to provide updated information and may adjust the cost of the bond based on the dealer’s financial condition, past performance, and any other relevant factors.

An auto dealer bond protects both consumers and the government against dealers who don’t follow state rules and regulations. An MVD bond protects consumers from intentional fraud, inaccurate information, deceptive pricing, tampering with the odometer, failure to provide warranties, faulty services, and other fraudulent practices. It protects the government from dealerships that fail to report earnings, pay taxes or fees, or adhere to regulations.

To apply for an MVD bond, a dealership will have to provide the surety company with the following information:

• Dealership legal name and DBA
• Address and phone number
• Years in business
• Owner(s) name, address, and Social Security Number

A motor vehicle dealer bond is required for motor vehicle dealers, while a motor vehicle salesperson bond is required for motor vehicle salespersons. Both bonds serve similar purposes – to protect consumers against fraudulent or unethical actions. A motor vehicle dealer bond is typically larger in amount than a motor vehicle salesperson bond.

Here are bonds that are similar to MVD bonds in that they protect buyers against fraudulent or unethical business practices:

• Auto broker surety bond: This bond is required for parties that broker a deal between auto sellers and buyers and protects the broker’s customers.
• Vehicle wholesaler bond: This bond is required by wholesalers of used vehicles and protects auto dealers.
• Motorcycle dealer bond: This bond offers the same protection to motorcycle buyers and is required for motorcycle dealers.

Any person harmed by a motor vehicle dealer’s failure to fulfill their contractual obligations or otherwise damaged because of the dealer’s actions can file a claim against an MVD bond. This can include a customer who was overcharged, someone who was sold a vehicle with undisclosed damage, or a customer who bought a vehicle that was not as represented.

After the claim has been investigated, a decision will be made about its validity. This investigation will be conducted by the surety agency that wrote the bond. Depending on its outcome, the surety company can either conclude that the claim is false or that there is not enough evidence to support the claim, or the surety may agree that the claim is legitimate. If the claim is upheld, the dealer will bear all costs incurred because of the claim and investigation.

If a claim is successfully filed against a dealer bond, the surety will investigate the claim and attempt to resolve it without going to court. If the claim is not resolved amicably, the bond company may take the matter to court, where a judge may order the dealer to pay a claim up to the bond’s maximum limit. The dealer is then responsible for repaying the surety for all payments made on the claim, plus any legal fees.

It’s a simple process. Start by requesting a quote here, and TMD Surety Bonds will make sure you get your motor vehicle dealer bond the same day, sometimes in minutes.