Florida's $25,000 Motor Vehicle Dealer Surety Bond Requirement: What It Means to the Consumer and Independent/Franchise Car Dealer

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The state of Florida requires a $25,000 motor vehicle dealer surety bond of all license motor vehicle dealers. DBL Surety describes the requirement, licensing process, and regulations surrounding the industry.

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DBL Surety, LLC

All motor vehicle dealers must provide a surety bond to the state of Florida in the amount of $25,000...

The regulatory environment for motor vehicle dealers in the state of Florida has seen its ups and downs over the past few years. What was once an industry with a relatively low barrier to entry is now one rife with regulation in an attempt to protect the consumer from unscrupulous motor vehicle dealers. Before we take a look at the recent changes and issues surrounding the industry in Florida, let’s examine what classifies an individual or business as a motor vehicle dealer.

The state of Florida has several motor vehicle dealer license types. These licenses range from independent and franchise car dealers to wholesale, auction, and salvage car dealers. All of the aforementioned licenses are governed by Florida Statute Chapters 320 and 321 which require any individual, partnership, or corporation which buys, sells, offers for sale, or deals in three or more motor vehicles to obtain motor vehicle dealer license of the appropriate type.

Now let’s get into the fun stuff. Just how many and what regulatory hoops do Florida auto dealers need to jump through in order to obtain their license in Florida? The rough number is twelve although it can vary depending on how you count the procedures required for each step. They include obtaining dealership site approval from the state, payment of a $300 location fee, providing proof of location ownership or lease, obtaining a pre-licensing dealer training certificate, obtaining the proper insurance according to license type (yes it varies…), registering your business with the state, and providing articles of incorporation/partnership, a sales tax number, a federal employer identification number, fingerprints, and, last but not least, a $25,000 motor vehicle dealer surety bond to the state. Did you get all of that? Good, now let’s discuss the $25,000 surety bond requirement and the recent issues surrounding it.

All motor vehicle dealers must provide a surety bond to the state of Florida in the amount of $25,000 or a letter of credit in equal value. Each surety bond has a mandatory expiration date set by the state which depends on your license type. The current expiration date is December 31st for franchise car dealers and April 30th for non-franchise car dealers. The purpose of the motor vehicle dealer bond is to protect the consumer from harm should the dealer violate the rules and regulations which govern the industry. The consumer can file a claim with the state which allows the harmed consumer to collect monies owed to them which were caused by the dealership’s violations. The surety bond then acts a backstop and pays the consumer if the motor vehicle dealer cannot or is unwilling to pay the consumer directly for damages caused by its actions.

Most people would think the motor vehicle dealer surety bond would pay up to $25,000 and then the bond would be exhausted. However, this wasn’t the case a few years ago when several attorneys found a loophole in the surety bond. They argued that attorney’s fees should be included under the payment provisions of the surety bond and the limit should not be capped at $25,000. In some cases, the actual harm caused to the consumer was minimal but the attorney’s fees amounted to hundreds of thousands of dollars. Whether these fees can be considered reasonable is often debated but payment was sought through the surety bond nonetheless.

The aforementioned actions and general uncertainty about the amount of liability made many surety companies uncomfortable and several of them refused to write the Florida motor vehicle dealer surety bond as a result. As of the date of this article, many surety companies still refuse to write or offer to write these bonds on a limited basis. That being said, there are some surety bond companies who widely write these bonds for qualified applicants and even those with bad or struggling credit. Qualified applicants should expect a rate of 1% of the bond amount while those applicants not meeting minimum credit standards should expect rates ranging from 5-15% of the bond amount.

While the regulatory future of the motor vehicle dealer industry in Florida remains cumbersome, it should not be a deterrent for individuals seeking to open a dealership. Please visit DBL Surety’s Florida Motor Vehicle Dealer Surety Bond page to learn more about the licensing requirements, call us at 386-316-2547, email us at info@dblsurety.com, of fill out our online application to get bonded today! Looking for information on other surety bonds? Visit DBL Surety’s homepage to learn more.

By Bart Leek

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Bart Leek
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