The Surety Bond

Buyer’s Guide for California Used Car Dealers!

Proudly brought to you by Mike Ramos and the team at Your Car Dealer Bond LLC!

California Used Car Dealer Bond Buyer’s Guide Index for Simple Navigation

The intent of this California Used Car Dealer Bond Buyer’s Guide is to shed light on a variety of subjects that are relevant to auto dealers in 2021. This is not an attempt provide legal advice in any manner. If you appreciate the time that went into developing this resource for you, please share it with a friend in the car dealer industry!

What is a Curbstoner
What are the California Curbstoning Laws?

A California Curbstoner is someone that sells more than 5 vehicles per year without becoming a licensed car dealer. Flipping a car to make a profit a couple times a year could just be a nice sideline business but the DMV cut-off is 5 per year.

These Curbstoning laws are in place to protect licensed California used car dealers that have significant overhead to run a legal dealership.

Even though a great bond agency in California like Your Car Dealer Bond can help you keep you surety bond costs low, your lot lease, reconditioning, payroll, various taxes, DMV, auction fees, dealer insurance, dealer management software, marketing can be mostly if not managed properly.

Can a Wholesale Dealer Sell to the Public?

No! Just so we are on the same page, a wholesale dealer cannot sell vehicles to the general public. A wholesale car dealer can only sell to other licensed motor vehicle dealers. The wholesale car dealer may however, purchase from any car dealer auctions, private parties, and wholesale or retail car dealers.

A Profitable Way to Start Flipping Cars in California!

Making money flipping cars is not a new concept but the ways of marketing a dealership have changed. Flipping cars in California is a big business and can be very profitable as long as you are buying and selling your inventory with a large enough profit margin to account for all the expenses.

Notice the language we are using here…”the right price”. Knowing how much your expenses are per month is necessary to know how much you need to make on each car. Selling too many loss leaders is usually not a “Best Practice” for California used car dealers!

Although, you can also start flipping cars to experience something fun and interesting in your free time. It does require a time commitment to get things off the ground. But always remember that you get out what you put in! Patience is the key.

The California Wholesale-Only Car Dealer Model.

It’s natural to default to thinking that a wholesale used auto dealer makes money by selling a lot of inventory. In general, the game is about volume but with a very low profit margin per vehicle.

What every car dealer has to think about in 2021 is how do I ring out every relationship for just a little more. Is there a way to increase the value you are bringing to the table for your customers in order to catch just a little bit more profit?

The simple truth is that the low overhead, liability exposure, and time commitment can really be the incentives of a wholesaler. The key here is building a tight process and optimizing your dealer connections.

California’s Retail Used Car Dealer Model.

Without getting analysis paralysis, strong research of your particular market is vital. California Car sales is fiercely competitive and knowing your numbers will help you price your inventory properly.

Then the next major factor is how you are getting your clients and minimizing your customer acquisition cost. This is easier said than done.

Top this off with making sure that you are delivering the right type of value to every client. Trust me, it’s cliché for a reason!

Is Auto Brokering the Ultimate Car Dealer Sales Model?

An argument can certainly be made for this business model if you can iron out some of the details. Used car dealers in general can be difficult to deal with but if the right process is in place, their ability to create relationships has a chance to make a big difference.

A document clearly detailing out the duties each party will have is half of the secret sauce here. For an auto broker, clearly detailing the payment arrangement in writing is the other half.

Still Debating on a Wholesale, Auto Broker, or Retail Car Dealer License?

Are you still looking for the best California Car Dealer license type for your particular situation? Are you still not convinced that getting your license is needed? Or are you confused with the various steps involved in getting through the red tape that the DMV makes you work around to get licensed as a car dealer?

It’s normal for someone to be confused and spend time getting to know the industry. You need to understand which car dealer license is best for your specific business model.

If you are still debating on which license to choose, give us a shout. Our experts can help you in answering some of the most important questions that may be running through your head. Call 866-357-4405 and ask for Mike Ramos (the founder and president of Your Car Dealer Bond LLC). He also returns calls quickly in case you leave him a message.

California Car Dealer Education Services

Your Car Dealer Bond (YCDB) can also help you find great resources to provide quality education services for car dealers. Whether pre-licensing education or continuing education, we can help set you up with either one quickly and get you on your way to flipping your next car quickly!

Perhaps you are looking for more than the required education by the California DMV? Contact Mike Ramos to help you optimize your dealership. Our simple step-by-step process of increasing your profit will help you increase $15,000 in your 1st year as long as you follow the simple process!

I know you feel overwhelmed so let us help right now, unless you are satisfied with the same result you’ve been getting.

The Simple California DMV Dealer License Checklist.

In addition to getting your pre-licensing education you will need your:

DMV application.
Proof of passing your DMV Dealer License test.
Livescan fingerprints.
Business License (unless in an unincorporated portion of the City).
Seller’s Permit (issued by the California Board of Equalization).
A Surety Bond for $10,000 or $50,000.
Fictitious Name Statement or Articles of your LLC / Corporation
Rental agreement or lease on your lot
Photos (8 if wholesale-only and 12 for retail auto dealers.)

Terminology is important so before we proceed with additional sections of the California Used Car Dealer Buyer’s Guide, we should clarify what we are talking about.

7 Generic Terms for a Car Dealer Bond

One of the most foreign parts of the California DMV Dealer Licensing process is the surety bond part. We made a quick summary of some of the most common names you may have heard just so there is no confusion.

Dealer Bond
Motor Vehicle Dealer Bond
Used Auto Dealer Bond
Used Car Dealer Bond
Vehicle Dealer Bond
DMV Dealer License Bond
Surety Bond for Car Dealers

6 Specific Terms for a Car Dealer Bond

Retail Car Dealer Bond
Wholesale Car Dealer Bond
California Auto Dealer Bond
Auto Broker Bond
Surety Bond for DMV Dealers
Surety Bond for Motor Vehicle Dealers

Used Car Dealer Bond Intro

A bond provides great comfort to potential clients and lenders. A surety bond is mandatory for California Used Car Dealers and is monitored closely by the Department of Motor Vehicles (DMV). This is unlike California Used Car Dealer Insurance, which is only mandated by the auctions / lenders and landlords as of June 2021.

Remember that the majority of our customers were referred by a friend. For that reason, we ask that you share the California Used Car Dealer Bond Buyer’s Guide with a friend that you think would benefit from having access to the same great content!

3 Quick Ways to Understand a Car Dealer Surety Bond.

The typical participants of a dealer bond are:

Obligee – The government entity or individual requiring a “principal” to be bonded. The DMV in the case of used car dealers.
Principal – The primary person / business who is required to be bonded. The car dealer in this case. Note: Sole-Prop’s, Partnerships, LLC’s, and Corporations count as the “business”.
Surety – financial guarantor who assures the “obligee” that the “principal” can perform the task. The Dealer is responsible for reimbursement of any paid bond claim. The Surety Carrier in this case.
A Used Car Dealer Surety Bond is a legal contract that guarantees and protects customers. The Dealer Bond promises to provide aid in the recovery of financial loss resulting from dealer fraud or unethical business activity.

California requires motor vehicle dealers to procure a Surety Bond in order to operate legally. The Bond also acts as a line of credit and assists in regulating the Independent Auto Dealer industry. An Auto Dealers Bond conveys credibility to both current and future customers.

1 Simple Way to know if I need a Car Dealer Surety Bond!

The issuing governing entity controls whether a dealer bond is mandated and determines the required bond limit. The Department of Motor Vehicles (DMV) is also known as the Motor Vehicle Department (MVD), is the oversight entity that keeps our used auto dealers in line.

The surety company issues a bond that is signed by their power-of-attorney, stamped with an embossed seal, and then notarized, thus validating it as an official document. The Auto Dealer Bond is required before business owners can get a license to operate in the state of California.

* It’s important to note that the DMV can activate a claim against the surety bond if the dealer is not fulfilling their obligations voluntarily.

The Best Way to apply for a Car Dealer Surety Bond…

Lucky for you, you can apply for your surety bond seamlessly on www.Cal-Surety.com. Once we receive the application, we Best California Car Dealer Podcast will work to get you approved by a strong surety bond market. Regardless of your situation, we feel that you will really appreciate the high level of experience and the deep care we take with every auto dealer that comes our way.

We appreciate the chance to earn your business! And take it from the founder and president of Your Car Dealer Bond LLC, Mike Ramos, the more bonds we sell the more great resources we can put out.

On top of the California Used Car Dealer Bond Buyer’s Guide you are enjoying right now, we also developed a podcast that is dedicated to the success of the used car dealer industry. Check out the Your Car Dealer Podcast today on Stitcher, The iTunes Store, Spotify!

We also put out the California Used Car Dealer Insurance Buyer’s Guide earlier this year just for you! You will gain years of industry knowledge for free by really reading through these great resources which were crafted to cater to our California used car dealers, wholesale, retail, or auto brokers.

Do you know how much a Dealer Surety Bond Costs?

Bond premiums can range between 1% and 15% of the bond limit. See the California Used Car Dealer Bond Rater below. Surety bond premiums vary due to the following reasons:

Surety bond limits in California are $10,000 or $50,000.
Credit Score. The Experian Credit Score is what most surety bond carriers will rate your bond.
Citizenship Status: Citizen, Non-Citizen with Permanent Resident Card, Non-Citizen.
Application Credentials. Financials are usually not used for California Car Dealers thankfully.
California motor vehicle dealer bonds can be purchased on a 1 year term or 2 year term. The bond will remain in effect until canceled as long as they are renewed as needed. The surety bond could potentially be canceled automatically if it is determined that the principal has violated the terms of the bond.

Bond Limit	$10,000.00	Bond Limit	$50,000.00
1.0%	$100.00	1.0%	$500.00
1.5%	$150.00	1.5%	$750.00
2.0%	$200.00	2.0%	$1,000.00
2.5%	$250.00	2.5%	$1,250.00
3.0%	$300.00	3.0%	$1,500.00
3.5%	$350.00	3.5%	$1,750.00
4.0%	$400.00	4.0%	$2,000.00
4.5%	$450.00	4.5%	$2,250.00
5.0%	$500.00	5.0%	$2,500.00
5.5%	$550.00	5.5%	$2,750.00
6.0%	$600.00	6.0%	$3,000.00
6.5%	$650.00	6.5%	$3,250.00
7.0%	$700.00	7.0%	$3,500.00
7.5%	$750.00	7.5%	$3,750.00
8.0%	$800.00	8.0%	$4,000.00
8.5%	$850.00	8.5%	$4,250.00
9.0%	$900.00	9.0%	$4,500.00
9.5%	$950.00	9.5%	$4,750.00
10.0%	$1,000.00	10.0%	$5,000.00
10.5%	$1,050.00	10.5%	$5,250.00
11.0%	$1,100.00	11.0%	$5,500.00
11.5%	$1,150.00	11.5%	$5,750.00
12.0%	$1,200.00	12.0%	$6,000.00
12.5%	$1,250.00	12.5%	$6,250.00
13.0%	$1,300.00	13.0%	$6,500.00
13.5%	$1,350.00	13.5%	$6,750.00
14.0%	$1,400.00	14.0%	$7,000.00
14.5%	$1,450.00	14.5%	$7,250.00
15.0%	$1,500.00	15.0%	$7,500.00

Top 3 Ways to Reduce the cost of my Used Car Dealer Bond…

Establishing or Fortifying your Credit:

The most common reason we see for a high-priced bond is the dealer not having established credit. In this scenario, no credit is basically the same as bad credit.
1. There are a few reasons why folks don’t have established credit when they are getting their dealer license. Simply being young and not having loans that have been set up through a bank may be the most common.
2. The other reason that is common with Used Car Dealers is that the individual likes to pay for everything with cash.

Some folks buy into the logic that they never want to buy anything that they can’t pay for on the spot. While that is a great approach, it doesn’t help establish credit.

The process of building credit will take some time but getting a credit card with a very low limit can help quite a bit.

Buy $25 – $50 worth of items every month and pay the card off within 2 or so weeks of the charges.
With about 6 months of this process, you will be in a good position to call your credit card company and ask them to increase your credit limit. Then keep doing the same thing.
California Car Dealer Podcast

The fact that you have never been late on a single payment will look great. Also having available credit that you are not utilizing will also improve your overall credit profile. You should see a nice increase in your credit score with this strategy and will be in good shape to renew your bond at a much-reduced cost as your Experian Credit Score improves.

Another critical component of your credit score is your Revolving Debt Balance or the amount of free credit you have. Simply put if you have a credit card with a $1,000 credit limit and you have a $250 balance, then you are using 25% of your available credit. Somewhere between 15% – 30% is great but anywhere over 40% is usually going to create a rate increase.
Experience counts! Your initial year in business will be the most expensive for used car dealers. There will be rate relief after 12 months in business, followed by the full elimination of the new business penalty as you proceed into your 3rd year in the industry

What are my options if I don’t want to purchase a Surety Bond?

Posting cash directly with the obligee is an alternative on occasion. Some obligees like the California Department of Motor Vehicles will also accept an Irrevocable Letter of Credit in lieu of a surety bond.

Please note. The purpose of the California Used Car Dealer Buyer’s Guide is to educate the industry and provide a great resource on a mass scale. Explaining this stuff to car dealers one at a time is slow process so we developed this buyer’s guide for California used car dealers since no one else had ever done it.

We are not advising you legally to do one thing or another, we are simply providing insight from the info that we have gathered over the past 20+ years and are packaging it up nicely for you to consume.

Top 5 Reasons that Used Car Dealers should NEVER Post the $50,000 themselves!

100% Collateral. You have to provide them with your assets to make the guarantee.
Opportunity Costs. You won’t have to pay for a bond premium, but the lost investment income (even in conservative investments) from posting 100% collateral is more than the surety bond costs for most.
Decreased Capital. Posting your own assets in lieu of a bond decreases your liquidity.
Claims Administration and Legal Fees! A quality Surety Bond Market will provide industry experts to administer any potential claims against you and have a legal team that is well-versed in DMV Regulations.
The long tail of exposure. There is a statute of limitations that must run out before the obligee will allow you to liquidate the account that your bond your Irrevocable Letter of Credit is tied to. The California DMV allows claims to be made for up to 3 years after the date of the claim occurrence. Other states may vary.

3 Significant Ways that Bond Claims Affect You:

Your bond is a guarantee that you’ll pay for any claims that you cause. If you neglect to pay bond claims, your bond could potentially be cancelled with no refund. It may become impossible to find another bond company willing to issue bond to you from that point forward.

They can cost you thousands of dollars.
Surety bond claims can decrease your chances to obtaining a bond or a dealer license in the future.
Bond claims can damage your professional reputation. Neglecting to pay bond claims can also damage your reputation in your industry. If you disregard claims on your bond, you’ll be viewed as someone who operates unprofessionally and doesn’t stick to their word.

Not paying claims on your bond can even lead to bankruptcy and legal action depending on the size of your surety bond claims.

To avoid claims, you need to ensure you fulfill the obligations of your bond. The best way to know your obligations under the bond agreement is to carefully read the language on the forms as well as familiarize yourself with all laws and regulations that apply to your business. Often, these laws will be mentioned in the surety bond format and the bond form language

5 Extremely Useful Tips to consider if you are purchasing a Motor Vehicle Dealer Bond…

Most insurance agencies in California provide personal insurance and commercial insurance, however, most do not specialize in Motor Vehicle Dealer Bonds nor have access to the best companies who write this line. It’s imperative you search around to find one who is knowledgeable with this product and have the resources to properly assist you in the event of a claim.
Understand the auto dealer bond properly. Consider reading your car dealer bond to know what all is covered and what is not covered. Most surety bond agencies do not even have clarity on this particular bond type and claims triggers.
Who is trying to sell you an auto dealer bond? The further you get away from the owner or CEO of the company, the expertise tends to drop off dramatically! Remember that experience counts!
Bad credit can often delay bond quotes or at times be the basis for denying a car dealer bond. Find out the situation with your Experian credit score so there are no surprises and so that a bond agent doesn’t try and take advantage of you.
Be careful of dealing with bond agents that don’t mention or don’t fully understand the bond claim process. Any surety bond agent in California should also fully understand the DMV licensing process so they fully understand your industry.

3 of the Most Common Surety Bond Misconceptions:

A surety bond is not insurance. If the dealer engages unethical or unlawful business practices, the bond is in place to protect any person who suffers financial loss up to the full penal sum of the bond limit. The bond carrier will pay for the damages, and the dealer is responsible for paying back the bond carrier. Remember, the bond protects the consumer. Insurance protects your business.
Car dealer bonds are very costly. There is a popular misconception among the car dealers that purchasing the bond is very costly and will be a large hurdle to getting their DMV Dealer License.
Bond claims get paid for by the surety bond market (company). It’s critical to remember that you will repay for all surety bond claims 100%.

The Used Car Dealer Bond Market

The used car dealer bond market is becoming more crowded year over year. There are a lot of players in the market but not many provide you with end to end solutions to your requirements.

Although a used car dealer bond is mandatory for all the California Used Car Dealers, not all bond services in California are created equally due to their experience level with dealing with the DMV and licensed used car dealers.

We specialize in California Used Car Dealer Bonds and have for over 8 years. Find out how YCDB is one of the fastest growing surety bond agencies of California! With thousands of satisfied customers, Your Car Dealer Bond LLC is making a name as the go-to experts in the California Bond Market.

The Surety Bond Format in Simple Terms!

The surety bond format does not vary from agency to agency, or even surety company to surety company. The content of each California dealer bond is identical due to the language being dictated by the California Department of Motor Vehicles.

Each auto dealer bond is signed by the carrier or Power of Attorney, then notarized. The final step is the placement of the embossed seal.

Surety bonds are typically written for 1, 2, or 3 year terms, although the 3-year bond is becoming rare.
Your inspector will be asking for the original bond but keep a copy for your records.

Although the California Used Car Dealer Bond Buyer’s Guide seeks to simply various topics related to the industry, some things are more complex than others. A surety bond is very simple to understand if you think of it like a cashier’s check that a bond carrier writes to cover the activities of a used car dealer.

Why does the DMV require a Surety Bond?

A surety bond is a mandatory document for all the used car dealers in California, unless the dealer posts the cash. Protecting the customers and vendors that do business with Used Car Dealers is really the primary function.

Keeping the tax payers out of harm’s way is also an important purpose of a surety bond. This is because the DMV is funded by tax payers and if the licensed dealer doesn’t pay the fees and fines, then the bond is there to step in and make sure that the DMV doesn’t suffer a loss.

There have been talks for years about increasing the amount of bond that is required for wholesale and retail used car dealers. The retailers in particular have a different exposure vs. an auto broker or wholesale-only dealer selling more than 24 vehicles per year.

You would think that the DMV would be smart enough set a higher standard for protecting the public but I suppose that is why this resource is so valuable!

This bond being in place is another reason that buying a vehicle from a private party (and potentially a curbstoner) is less attractive in 2021!

Bad Credit, No Credit, or Not a Citizen?

Do you have no credit at all or a really low credit score? Are you being denied or quoted a huge amount for your used car dealer bond? We can probably help you.

If you have access to a co-signer with strong credit then we should be able to help you get a competitive rate and possibly a payment option.

If you are not a US Citizen but have a Permanent Resident Card (Green Card), you can still obtain a surety bond in most cases. However, the process will not be as simple as that of others. We will help you and go to work to help you in every way possible.

While we are attempting to remain positive throughout the California Used Car Dealer Bond Buyer’s Guide, we must remain honest. Some applicants are not bondable due to open bankruptcy’s, or a combination of the bond criteria.

Are all Surety Bonds the same – is the only difference the cost?

While I would love to think that the only difference between all surety bonds was the cost, it’s simply not the case. This is where I drag out my competition into the deep waters and watch them panic in confusion!

Although all California car dealer bonds have the same language, they are not all backed by the same carriers. Each insurance carrier and surety bond company (market) are rated by AM Best. AM Best has a simple method of scoring which is similar to how you were graded in school: A, B, C, or D.
1. Letter grade “A” is all that matters because you should never write your bond with a surety bond market that is less than A- rated since this rating represents that company’s financial strength and the number of justified Department of Insurance complaints.
To add even more variance to the surety bond world, each surety bond carrier (market) has a slightly different operational structure. This is often the where the differences are found for the most well-versed and experienced agents in California.

In summary, your bond carrier matters and anyone that tells you different is simply demonstrating how little they understand about how bonds work. Be vigilant and don’t be fooled by an agent’s pleasing personality.

If they don’t understand this stuff but are likeable enough, take them out to lunch instead of buying your car dealer bond from them! This way you are not upset when they offer you no value but call you to renew your surety bond every year.

Do I need Dealer Insurance to get my California DMV Dealer License?

NO!!!! It’s regrettable that in California a surety bond is a mandatory requirement for all Used Car Dealers but the DMV forgot (or maybe didn’t) to make dealer insurance compulsory.

Let me say that again. As a regular person operating a vehicle in California, I am mandated to carry Minimum Financial Responsibility Insurance, aka Liability Insurance. The minimum limits of coverage for a regular person is:

$15,000 of bodily injury coverage per person for an accident you cause; and
$30,000 of bodily injury coverage per accident you cause; and
$5,000 of property damage coverage for any accident you cause.

While applying for or renewing a California DMV dealer license, no such insurance requirement exists!!!!!!!!!!!!!!!!!!!!!!!!!!!! This is negligent on the part of the Department of Motor Vehicles or the management heads of the Occupational Licensing Division. If states like Oregon can figure this out, then California should be able to do the same.

An auto dealer that doesn’t want to insure their exposures properly and put the pubic in harm’s way, should not be in business.

A used car dealer that doesn’t have the money to pay for proper liability insurance should not be in business! These dealerships are usually the ones creating all the unpaid claims by stiffing the general public and other dealers every chance they get.

6 Critical Used Car Dealer Services provided by YCDB!

The following critical car dealer services are provided by Your Car Dealer Bond LLC (YCDB) as of January 2021 and we are adding more services to this list as your needs develop:

Used Car Dealer Education through the Your Car Dealer Podcast!
DMV Dealer Pre-Licensing Audit.
California Used Car Dealer Insurance.
Used Car Dealer Bonds! Dealer Bond Payment Options may be available to you.
Dealer Management Software!
Car Dealer Branding and Implementation Strategy Development.

If you have any specific requirements, apart from what is listed above, please feel free to get in touch with us at 866-357-4405 or contact us through our website at www.cal-surety.com.

Why Trust Your Car Dealer Bond LLC (YCDB) to help you?

The president and founder of Your Car Dealer Bond (YCDB), Mike Ramos is an established industry expert after 21+ years of experience. If you buy into the theory that 10,000 of perfect practice will make you perfect, then you are in good company. Malcolm Gladwell wrote a famous book about it but I would say that it took me a bit longer than that to get my black belt in used car dealers!

I’m closer to 50,000 total hours spent in this specific automotive industry in various aspects by myself. Then I have a team of well-trained folks that help every dealer that comes across our desk. No other Surety Bond Agency in California helps auto dealers in more ways than YCDB.

That level of care and experience is unrivaled in 2021. We are the only bond agency that is completely dedicated to the success of the used car dealer industry.

How is YCDB Different than EVERY Other Surety Bond Service in California?

Are you kidding me? Did you read the sections titled 6 Critical Used Car Dealer Services provided by YCDB? I challenge you to ask any competing bond agencies if they can help you with more than 3 of the items on the list.

I know they can’t and so do you. Here’s the reason why we have focused on so many areas of the used car dealer industry. We have hundreds of dealers that have the same needs and after decades in the car dealer business, we have partnered with the best solutions for the most common areas where dealers struggle.

After seeing hundreds of dealers go out of business, we decided to do something about it. Offer more than just auto dealer bonds. Your Car Dealer Bond (YCDB) has a wide range of services for you which will enable you to get everything you want from one place. Remember time is money and convenience will usually generate more time for you.

Best Resources for a Used Car Dealer

There are a lot of resources on our websites, which you can access from the links here below:

www.cal-surety.com

Please check the various segments under drop down menu to browse through the website for even more information. We have filled the website with lots of curated best resources for a used car dealer. You can take advantage of it too.

Also, please don’t forget to give the Your Car Dealer Podcast a listen on Stitcher, the iTunes Store, Spotify, or on Libsyn. Mike Ramos has a variety of guests to help auto dealers take increase their sales and reduce their overall exposure.

Connect with Your Car Dealer Bond on Facebook, Instagram, and Youtube today!

We appreciate you taking the time to read through the California Used Car Dealer Bond Buyer’s Guide. If you enjoyed the content, please share it with your car dealer friends!

We appreciate the chance to EARN your business!

-president and founder of YCDB…Mike Ramos

About US –

Our mission at Your Car Dealer Bond is to bring premium results to small and middle-sized Used Car Dealerships for a fraction of what our competitors will charge.

©www.usedcardealeracademy.com/All rights reserved.

Customer Service