Iowa Motor Vehicle Dealer Bond

Comprehensive Guide to Iowa Motor Vehicle Dealer Bonds

A Motor Vehicle Dealer Bond in Iowa is a type of surety bond required by the Iowa Department of Transportation (DOT). It is part of the licensing process for motor vehicle dealers and towable recreational vehicle dealers. It is designed to protect the public, financing agencies, and the state from financial harm resulting from the dealer’s fraudulent acts or failure to comply with state laws and regulations.

Bond Overview and Requirements

Bond Amount and Obligee

• Bond Amount: The required bond amount is $75,000.
• Obligee: The entity requiring and enforcing the bond is the Iowa Department of Transportation (DOT), Office of Vehicle & Motor Carrier Services.
• Requirement: Any person or business selling more than 5 vehicles in a 12-month period must obtain an Iowa Motor Vehicle Dealer License, which requires this bond. Towable recreational vehicle dealers also require a $75,000 surety bond, though an applicant may only need one bond if they are licensed as both a motor vehicle dealer and a towable recreational vehicle dealer.

Purpose and Protection

The bond is a guarantee that the dealer (the Principal) will operate ethically and in compliance with Iowa Code Chapter 322. It protects the public (the Obligee) from monetary loss due to:

• Fraud or fraudulent representation.
• Failure to comply with licensing laws and regulations.
• Failure to pay required taxes and fees.
• Failure to deliver a valid certificate of title to a purchaser.

If a consumer or the state suffers a loss due to the dealer’s misconduct, a claim can be filed against the bond. The surety company (the third party guarantor) will pay valid claims up to the $75,000 bond amount, but the dealer is ultimately required to reimburse the surety for any claims paid out. The bond is a continuous obligation, meaning it remains in effect until canceled, and the premium is paid annually.

Cost of the Bond (The Premium)

The dealer does not pay the full $75,000 bond amount. Instead, they pay a small portion of it, known as the premium, which is a percentage of the total bond amount.

Determining Factors

The premium rate is determined by the surety company based on the applicant’s financial stability, primarily their personal credit score. Other factors considered include:

• Business financial statements and asset profile.
• Work experience and record.
• Dealer type and risk assessment.

Estimated Cost Range

For applicants with good credit, the premium rate is typically between 1% and 3% of the $75,000 bond amount, resulting in an annual cost between $750 and $2,250. Surety1.com has access to several surety bond programs for those with challenged credit as well.

Note: Dealers with less favorable credit can still obtain a bond through specialized programs but will pay a higher premium due to the increased risk for the surety.

How to Get an Iowa Motor Vehicle Dealer Bond

At Surety1.com we make it easy to obtain this surety bond. Our simple, three step process is:

1. Complete the easy to navigate and secure online application. ¹
2. Review the free, no obligation quote from one of Surety1’s professional surety bond agents, usually within one business day.
3. Sign some paperwork and pay the bond premium, all major credit cards are accepted.

Once these steps have been completed, the surety bond will be shipped to the bond applicant.
^{1 -The name of the applicant on the surety bond application must match exactly the full legal business name of applicant for the license.} 

After receipt of the bond from Surety1.com, Submit the signed bond form, along with a power of attorney (will be attached to the bond), to the Iowa DOT as part of your complete dealer license application package. The bond must be in place before the dealer license is issued and must be renewed annually to keep the license valid. Failure to maintain the bond will result in the suspension or revocation of the dealer license.

Surety1.com is a service of AssuredPartners one of the largest and fastest growing insurance agencies in the nation. Representing over a dozen surety bond companies, Surety1.com is the premier online provider of surety bonds nationwide since 2003.

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The Full Iowa Motor Vehicle Dealer License Requirements Checklist

The $75,000 Iowa Motor Vehicle Dealer Bond is just one step in the dealer licensing process. To legally operate a dealership in Iowa, you must complete all the following requirements and submit your application to the Iowa Department of Transportation (DOT).

1. Establish a Compliant Business Location

• Your principal place of business must meet strict requirements for zoning, facility size, and accessibility:
  • Zoning Approval: You must obtain a Zoning Letter from the local zoning authority confirming your business is compliant with all local ordinances.
  • Business Hours: The office must be open and staffed for a minimum of 32 hours per week, Monday through Friday.
  • Office: Must have a dedicated office area with a landline telephone listed in the dealership’s name.
  • Repair Facility: You must maintain a separate repair facility large enough (at least 14 ft x 24 ft) and equipped to repair and recondition at least one motor vehicle.
  • Display Area: A suitable area with an all-weather surface (no grass or soil) to display vehicles, with a minimum size of 18 ft x 30 ft for most vehicles.

Note: An Iowa DOT investigator will conduct an on-site inspection of your facilities before your license is approved.

2. Complete Education Requirements

• Used Vehicle Dealers Only: At least one owner, partner, or officer must complete an 8-hour pre-licensing education course approved by the Iowa DOT.
• New Vehicle Dealers: You must provide a signed franchise agreement with the manufacturer.

3. Secure Required Insurance

• Financial Liability Insurance: You must obtain and provide a Certificate of Liability Insurance with minimum limits of:
  • $100,000 for bodily injury or death of one person.
  • $300,000 for bodily injury or death of two or more persons.
  • $50,000 for property damage.
• Surety Bond: You must obtain and file your $75,000 Iowa Motor Vehicle Dealer Bond (Form 417064) with the DOT.

4. Submit the Full Application Package

• Once all of the above steps are complete, you will submit the following documents and fees to the Iowa DOT:
  • Completed Motor Vehicle or Towable Recreational Vehicle Dealer License Application (Form 411179).
  • Original $\$75,000$ Surety Bond.
  • Zoning Letter.
  • Certificate of Insurance.
  • Certificate of Attendance for the pre-licensing course (used dealers only).
  • Franchise Agreement (new dealers only).
  • Applicable Fees:
    • Dealer License Fee: $70.00
    • Dealer Registration Fee:$70.00 (required to order dealer plates)
    • Dealer Plates: $40.00 per plate

Getting your Iowa Motor Vehicle Dealer License involves a rigorous but clear process, from securing your $75,000 surety bond to passing the on-site inspection. By diligently following this checklist, especially the requirements for your business location and the necessary insurance, you’ll ensure a smooth application with the Iowa DOT. Don’t let any step slide; completing these requirements correctly is the foundation for a successful and compliant dealership.

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