Owning and operating a car dealership can be lucrative, given consumers’ constant need for new and used vehicles.
However, maintaining the success of a car dealership takes time, equity, and capital. In addition to get a car dealership license As part of the dealership state compliance process, auto dealerships must also have the proper bond to operate their business.
A car dealership surety may be called an automobile surety, car dealership surety, motor vehicle surety, or wholesale surety, but whatever it is called it is an integral part of doing business.
Dealer bonds provide a guarantee to customers and to the state that the dealer will comply with industry regulations. These bonds come at a cost to the dealer, with the total reimbursable charges depending on several factors, including personal credit history.
Dealers who have a bad financial history may feel like they can’t get a car dealership bond, but they just aren’t. Here are some tips for getting one with bad credit.
Fix what you can
Auto dealership bonds are designed to protect customers from bad business practices, and although the surety company guarantees payment of eligible expenses up to the bond limits, the dealer is obligated to repay those funds.
Given this relationship, dealers should have a strong financial history, as measured by their credit rating. Due to the correlation between personal credit and the qualification of the auto dealer’s obligations, it is important to have a high credit score.
But if a dealership hasn’t had the best money management history in the past, it was necessary to work on improving one’s credit rating before applying for a car dealership surety. Credit repair takes time, but there are some simple things that can be done to make a difference quickly. Checking your credit report for errors, reported debts that are over the time limit, or paying off collection accounts or high credit card balances makes all the difference.
Understand the pricing conditions
The good news is that dealers are not required to pay the full amount of the bond, but rather a percentage of the total coverage. Since the pricing of auto dealer bonds is highly dependent on the degree of risk a dealer poses to the surety agency providing the bond, the better the credit, the lower the price.
The more qualified dealers can get a car dealership bond for 1% of the bond amount, but those with less credit often pay a higher percentage – usually no more than 15%. Before applying for a new car dealership bond, be sure to recognize your credit situation and its impact on the total price you pay.
Work with a strong surety agency
It is possible to get a bond from a car dealership with bad credit, but dealerships have a better chance of securing a bond cheaply through a surety agency that understands credit issues. are common. A surety agency that offers access to many surety providers is a good solution as it can help the broker find the most suitable surety based on their credit rating and history.
A surety agency that provides resources to auto dealerships, from licensing to maintaining compliance, as well as bail claim assistance is a smart choice for auto dealers.
When you have bad credit, it may seem like getting a car dealership bond isn’t a viable option. Fortunately, taking small steps to improve your credit rating by removing mistakes or paying off debt, understanding how bond pricing works, and partnering with the right surety agency can help you get a dealer surety bond. automobile even when credit is a problem.
– Eric Weisbrot is Marketing Director of JW Surety Bonds.