Why are Bonds required to get a California Car Dealer License?
First of all, a bond covers the general public, lenders, the DMV, and other dealers in case an auto dealer isn’t paying their bills. A list of bond claim scenarios is below.
The limits of the bond that the DMV requires will also depend on what state you transact business but leave that all to us. Here are just a few states and their required bond limit set by the Department of Motor Vehicles (DMV):
- California Retail ($50,000 bond limit.)
- California Broker ($50,000 bond limit.)
- California Wholesale ($10,000 bond limit.)
- California Reg Agent ($25,000 bond limit.)
What protection does a Dealer Insurance Policy provide to a California Car Dealer?
Here are the more common claims or losses covered by a Used Car Dealer Insurance Policy:
- Stolen or vandalized inventory.
- Auto accidents in an inventory vehicle are probably the most common claim. Then the question is who was the driver? Either Minimum Financial Responsibility Limits (15/30/5) would apply or the liability limits on the policy would apply. This would depend on if the driver in the accident is listed on your dealer insurance policy.
- An uninsured motorist injuring you, one of your salespeople, or a test driver while on a test drive. Although prop. 103 requires all California drivers to maintain insurance, about 30% of all drivers or more are not insured at any 1 day of any given year. Although this may just be an opinion, it’s one that is well-formulated and based solely on 18 years of data analytics research.
Below are claims or losses that happen less often but they are covered by a Used Car Dealer Insurance Policy:
- Vandalized or stolen office equipment is less common but still happens.
- A dealer’s potential customer slipping and falling at the business is a nightmare for all involved.
- A fire ruining your inventory vehicles or the building you have purchased or are leasing is rare but costly.
- This is one that is rarely discussed because many insurance agents and even fewer car dealers understand the exposure. The claim occurs when a vehicle is stolen or damaged in any way while in the dealer’s care, custody, or control (Garage Keepers Coverage or GKLL). This sounds like an inventory coverage claim which is already mentioned above but it’s very different? I’m glad you asked why? It’s because inventory coverage will only pay for damages done to a vehicle that you own. Garage Keepers coverage is designed to cover vehicles that you do not own such as ones that you are test driving before you purchase them!
Call Mike Ramos for Your Car Dealer Bond 714-797-5780
Call Joseph Weatherman for Your Car Dealer Education 415-730-3137