Guest Post: Dealing With Dealers

It’s time to buy a car. How can you make certain the car dealer is above-board and trustworthy? You certainly do not want to buy a lemon. Been there, done that, do not want to do it again. One integral aspect often overlooked by consumers is finding out, before the transaction, whether the auto dealer is fully equipped with licensed auto dealer bonds.  Many consumers may not even know what a surety bond is and its importance.

In most states, auto dealers are required to file a surety bond with the Department of Motor Vehicles before receiving their automobile dealer license. The auto dealer surety bond protects the seller and customer.

For example, if the dealer were to do something deceptive or unscrupulous, the bond assists the consumer in recovering monetary damage incurred. The customer or wronged party gets reparation. Surety bonds mandate the principal (car dealer) honors the agreement he makes with the consumer. This bond guarantees the dealer will behave in accordance with the guidelines mandated by the state the business is located in. If he doesn’t  he faces penalties. The bond shields the consumer not the bond buyer (dealer.) The bond is an inducement to the dealer to avoid claims or mishaps in the first place


When an auto dealer (the principal) is bonded this tells the obligee (the customer) the purchase (car) is guaranteed. The ‘surety’ is the institution that backs the deal.

The car dealer makes annual payments to a surety company and in return, the dealer gets financial assurance. If the dealer reneges on an agreement with the consumer, the consumer executes a claim against the bond. If the company (surety) finds the claim is legitimate the consumer is reimbursed, and the dealer has to repay the surety company.

Unlike the insurance industry, the surety bond industry does not perceive claims as inescapable. Rather the surety (company), principal (dealer) and obligee (customer) take steps to circumvent losses.

The surety bond gives the buyer declaration, he isn’t getting a lemon, and it also protects the state issuing the bond from problems concerning the sale of the vehicle.

The bonded dealer is liable for his actions and cannot misrepresent merchandise, engage in disreputable tactics and must provide valid certificates of tile. The dealer cannot default on paying required fees and taxes to the state.

When shopping for a car, new or used, ask the dealer if he is bonded. Do not do business with a dealer that is not bonded.

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