If you run an auto dealership in South Carolina, you are legally required to secure a South Carolina motor vehicle (MVD) bond. A MVD bond is a surety bond specifically designed to protect consumers from bad dealership practices. MVD bonds are usually required by state, local, or federal regulations.
Most businesses that deal motor vehicles whether they be new, used, or wholesale typically
need a MVD bond to legally do business. Keep reading for more insight into what a South Carolina MVD bond is, how it works, and what they cost.
MVD bonds go by a few different names including auto dealer bonds, car dealer bonds, used car dealer bonds, dealer bonds, DMV bonds, bonds for dealer’s license, and motor vehicle bonds. In the state of South Carolina, MVD bonds are legally required to ensure that automotive dealers remain legally compliant.
South Carolina MVS bonds also help protect the public from bad dealership practices such as:
Businesses also benefit from having a MVD bond, as they give customers and business partners peace of mind that they are working with a business that is properly licensed and following the law.
South Carolina MVD bonds involve three different parties:
It’s worth noting that a surety bond is not the same thing as an insurance policy. While the surety will initially pay out any claims, the principal will be required to pay them back for any claims filed against their MVD bond.
To gain a better understanding of the purpose a South Caroline MVD bond serves and how it can work, let’s look at an example of how a claim against the bond can come to pass.
Tom lives in Charleston. He used to work from home and would bike around his neighborhood. He’s starting a new job in another city and needs to commute by car. To save money, he goes to his local used car dealership. All seems well for the first week or two, but then Tom gets in an accident on his way home from work because the brakes in his car were faulty.
Why didn’t the used car dealership catch these break issues before selling Tom the car? Good question. Because the dealership didn’t do their due diligence, Tom can file a claim against their South Carolina MVD bond to cover costs associated with the accident like medical bills and lost wages.
If the surety investigates the claim and finds the dealership to be guilty of negligence, they will need to pay Tom a claim of up to $30,000 which is the bonding capacity in South Carolina. The dealership will then need to pay back the claim amount to the surety.
When shopping for a South Carolina MVD bond, it can be helpful to know the following terms.
Because you can generally expect to pay 1% to 10% of the bonding capacity to secure a MVD bond and the bonding capacity in South Carolina is $30,000, your bond premium will likely range from about $300 to $3,000.
What your sales volume looks like, the type of dealership you run, how high your credit score is, and how much business experience you have can all affect your bond premium. Usually, the higher your credit score is and the more business experience you have, the lower your premium will be.
Learn more about what a South Carolina motor vehicle dealer bond will cost you today!