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Alabama Auto Dealer Bond: A Comprehensive Guide for Insurance Agents
This guide provides information for insurance agents to help new and pre-owned car dealership owners on Alabama Auto Dealer bonds.
At a glance:
Average Cost: $250-$2,500 per year, rates are based on business owner’s credit
Bond Amount: $50,000
Who Needs It: Required for all new, used, and wholesale dealership owners selling automobiles, RVs, and/or motorcycles in order to activate or renew their Master Dealer license in the State of Alabama. Auto rebuilder shops also need to purchase the bond.
Purpose: To ensure the public will receive compensation for any damages should the auto dealer fail to comply with the licensing terms.
Who Regulates Dealers in Alabama: The Alabama Department of Revenue, Motor Vehicle Division, is in charge of licensure and regulation of motor vehicle dealers.
Background
Alabama House Bill 393 amends statute sections 40-12-264, 40-12-390, 40-12-391, 40-12-392, 40-12-393, 40-12-395, and 40-12-398 relating to motor vehicle dealer licensing. As of October 1, 2020, all automotive dealers who wish to sell, advertise, or negotiate the sale of a motor vehicle must obtain a Master Dealer License. The Master Dealer License is a combination of four previous licenses:
The Alabama Master Dealer License is a professional license issued by the state of Alabama permitting a dealer to buy, sell, advertise, or negotiate the sale of a motor vehicle. Possession of the Master Dealer License ensures that dealers are operating legally and in full compliance with the regulations set forth by the Alabama Department of Revenue, Motor Vehicle Division.
Why Was the Master Dealer License Created?
Code of Alabama 1975 requires auto dealers to be licensed so that both the State of Alabama and its residents are financially protected should dealers fail to comply with the laws of the state. In 2020 the Master Dealer License was created to combine the four previous dealer licenses into a single (master) license class. Previously, dealers were required to obtain a new, used, wholesale, and/or a rebuilder license depending on the nature of their business. The Alabama Auto Dealer bond previously had a limit of $25,000, and the new legislation amendments require a new bond at the increased $50,000 limit. Legislators introduced the bond amount increase primarily to combat the illegal practice of curbstoning, which consists of auto dealers selling vehicles privately to evade licensed dealer regulations.
What Are the Insurance Requirements for the Master Dealer License?
To obtain a Master Dealer License the client will need to submit a Master Dealer surety bond with a limit of $50,000 to the State Commissioner of Revenue. Auto dealers must also obtain blanket garage liability insurance and provide proof of insurance to be eligible for a license. Failure to maintain blanket garage liability insurance can result in a $5,000 civil penalty. The minimum garage liability insurance is as follows:
The Alabama auto dealer surety bond can cost anywhere between $250 to $2,500 per year. Insurance companies determine the rate based on a number of factors including the customer’s credit score and experience.
How Does the Dealer File Their Bond With the Alabama Department of Revenue?
The $50,000 surety bond requires signatures from both the surety company that issues the bond and the auto dealer. The bond form will require the following items:
Department of Revenue
Motor Vehicle Division
2545 Taylor Rd
Montgomery, AL 36117
Why Does Alabama Require the Motor Vehicle Master Dealer Bond?
Alabama requires dealers to purchase the Master Dealer Bond as part of the application process for the Master Dealer License. The Master Dealer bond ensures that the public will receive compensation for financial harm should the auto dealer fail to comply with the licensing terms and that the dealer will pay all required taxes to the Department of Revenue. The bond acts in favor of those doing business with the dealer and as a bottom-line barrier to entry for the dealer to operate.
What Can Dealers Do to Avoid Claims Against the Alabama Auto Dealer Bond?
To avoid claims on the Master Dealer Bond, dealers should adhere to the following practices:
This guide provides information for insurance agents to help new and pre-owned car dealership owners on Alabama Auto Dealer bonds.
At a glance:
Average Cost: $250-$2,500 per year, rates are based on business owner’s credit
Bond Amount: $50,000
Who Needs It: Required for all new, used, and wholesale dealership owners selling automobiles, RVs, and/or motorcycles in order to activate or renew their Master Dealer license in the State of Alabama. Auto rebuilder shops also need to purchase the bond.
Purpose: To ensure the public will receive compensation for any damages should the auto dealer fail to comply with the licensing terms.
Who Regulates Dealers in Alabama: The Alabama Department of Revenue, Motor Vehicle Division, is in charge of licensure and regulation of motor vehicle dealers.
Background
Alabama House Bill 393 amends statute sections 40-12-264, 40-12-390, 40-12-391, 40-12-392, 40-12-393, 40-12-395, and 40-12-398 relating to motor vehicle dealer licensing. As of October 1, 2020, all automotive dealers who wish to sell, advertise, or negotiate the sale of a motor vehicle must obtain a Master Dealer License. The Master Dealer License is a combination of four previous licenses:
- New Dealers
- Used Dealers
- Wholesale Dealers
- Rebuilders
The Alabama Master Dealer License is a professional license issued by the state of Alabama permitting a dealer to buy, sell, advertise, or negotiate the sale of a motor vehicle. Possession of the Master Dealer License ensures that dealers are operating legally and in full compliance with the regulations set forth by the Alabama Department of Revenue, Motor Vehicle Division.
Why Was the Master Dealer License Created?
Code of Alabama 1975 requires auto dealers to be licensed so that both the State of Alabama and its residents are financially protected should dealers fail to comply with the laws of the state. In 2020 the Master Dealer License was created to combine the four previous dealer licenses into a single (master) license class. Previously, dealers were required to obtain a new, used, wholesale, and/or a rebuilder license depending on the nature of their business. The Alabama Auto Dealer bond previously had a limit of $25,000, and the new legislation amendments require a new bond at the increased $50,000 limit. Legislators introduced the bond amount increase primarily to combat the illegal practice of curbstoning, which consists of auto dealers selling vehicles privately to evade licensed dealer regulations.
What Are the Insurance Requirements for the Master Dealer License?
To obtain a Master Dealer License the client will need to submit a Master Dealer surety bond with a limit of $50,000 to the State Commissioner of Revenue. Auto dealers must also obtain blanket garage liability insurance and provide proof of insurance to be eligible for a license. Failure to maintain blanket garage liability insurance can result in a $5,000 civil penalty. The minimum garage liability insurance is as follows:
- $25,000 bodily injury/person/accident
- $50,000 combined bodily injury/accident
- $25,000 property damage/accident or a combined single limit of $75,000/accident
The Alabama auto dealer surety bond can cost anywhere between $250 to $2,500 per year. Insurance companies determine the rate based on a number of factors including the customer’s credit score and experience.
How Does the Dealer File Their Bond With the Alabama Department of Revenue?
The $50,000 surety bond requires signatures from both the surety company that issues the bond and the auto dealer. The bond form will require the following items:
- Legal name of individual(s) buying the bond
- City, county, and state where the business is located
- Surety company’s name and signature
- Date on which the bond will be executed
- Signature of all business owners
Department of Revenue
Motor Vehicle Division
2545 Taylor Rd
Montgomery, AL 36117
Why Does Alabama Require the Motor Vehicle Master Dealer Bond?
Alabama requires dealers to purchase the Master Dealer Bond as part of the application process for the Master Dealer License. The Master Dealer bond ensures that the public will receive compensation for financial harm should the auto dealer fail to comply with the licensing terms and that the dealer will pay all required taxes to the Department of Revenue. The bond acts in favor of those doing business with the dealer and as a bottom-line barrier to entry for the dealer to operate.
What Can Dealers Do to Avoid Claims Against the Alabama Auto Dealer Bond?
To avoid claims on the Master Dealer Bond, dealers should adhere to the following practices:
- Pay taxes on time and in full. Dealers should consider setting aside tax obligations as they accrue.
- Do not engage in the illegal practice of curbstoning
- Maintain blanket garage liability insurance at all times, failure to do so can result in a $5,000 penalty assessed against the bond
- Register for and renew your Master Dealer license by the deadline, a $500 fine for an initial violation will be issued followed by $1,000 fines for repeat offenses
- Obtain an off-site sales license 10 days prior to conducting an off-site sale and list all parties facilitating the sale on the application
- Adhere to the dealer license plate regulations approved by the state
- Pay your $125 application fee.
