Those in the business of selling used cars in the state of New York will need to comply with new surety bond requirements in the spring of 2017.
The car dealer bond is part of the licensing criteria enforced by the New York State Department of Motor Vehicles that auto dealers need to meet. With the newly passed New York Assembly Bill 8166, the bond amounts will be changing.
The new bill was introduced in the summer of 2015, but was passed on September 29, 2016. It will take effect on March 28, 2017 and will change the bonding amounts and the vehicle sales thresholds that determine these amounts that used car dealers post to the New York DMV.
Currently, dealers need to provide a $10,000 surety bond in case they are selling less than 200 vehicles per calendar year. If the vehicles are more than 200, the bond amount is $25,000.
With the new legislation, the number of vehicles and the bond amounts change. For dealers who sell less than 50 vehicles per calendar year, the requirement is a $20,000 bond. For those selling more than 50 vehicles, the bond increase means they will have to obtain a $100,000 bond.
Besides the bond amounts increase and the change in the vehicle thresholds triggering bond amounts, Bill 8166 introduces additional changes.
As of spring 2017, the New York DMV will need to get a 60-day warning from sureties in case a bond is about to expire. Surety providers still need to provide the same notice if they are cancelling a bond. Within five days of the expiration or cancellation of a bond, the commissioner will check whether a dealer has obtained proper bonding.
Dealers who are renewing, replacing, altering or extending bonds will need to comply with the new rules in the bill.
Impact to Dealers
Periodically, legislators need to adjust surety bond amounts to match the levels of risk associated with certain professions. In essence, the bond is a guarantee for the state and dealers’ customers that the car seller will act lawfully. If they transgress from state rules, a claim can be made on the bond, which ensures proper compensation to affected parties.
It’s important for New York used car dealers to note that while the bond amounts are increasing, the bond premiums still remain only a fraction of them. To obtain a bond, payments typically range from one percent to three percent per year. This means that for the $20,000 bond, a payment is likely to cover $200 to $600. As for the $100,000, the premium may be in the range of $1,000 to $3,000 per year.
With the increasing bond requirements, it’s also useful to consider the ways in which bond rates can be lowered. A premium is formulated based on a personal credit score, business financials and other finances. Even for a higher bond amount, a lower rate can be achieved if the business is strong and its finances are kept in check.
Todd Bryant is the president and founder of Bryant Surety Bonds. He is a surety bonds expert with years of experience in helping auto dealers get bonded and start their business.
Was this article valuable?
Here are more articles you may enjoy.