Beginning July 1, 2016, auto dealers in Iowa will need to post a $75,000 Iowa motor vehicle dealer bond in order to obtain a dealer license. This change comes after Iowa Governor Terry Branstad recently signed a number of bills of which Senate File 2228 introduces amendments to chapters 321 and 322 of the Iowa Code 2016.
These amendments include the change in surety bond amount, the development and implementation of a program allowing for electronic applications, registering and transfer of funds among others. Find out more about the amendments and what they mean for your dealership!
Changes to the Iowa Code 2016
Notable changes introduced in Senate File 2228 concerning Iowa auto dealers are as follows:
- a $75,000 auto dealer bond requirement (outlined in greater detail in the next section)
- establishing a system permitting for electronic applications, titling, registration and transfer of funds by January 1, 2018
- an explicit prohibition for licensed dealers to loan, rent, lease or charge a fee so that an unlicensed individual can use their license
- a $180 limit to ‘documentary fees’ for each vehicle sold and a requirement to include the fee in the price of the vehicle, if charged, as well as in the advertisement of the vehicle
The electronic application system is certainly a welcome development which is intended to reduce costs for all parties involved in the process of dealer and vehicle licensing, and improve its efficiency and timeliness. The program is also expected to allow for the submission of any other additional documentation required in Section 321 unless explicitly prohibited by federal law.
The so-called ‘documentary fee’ is an unofficial fee that Iowa car dealers can charge their customers to prepare vehicle registration documents, the application for the issuance of a certificate of title and other services. The maximum limit of that fee has now officially been set to $180 and is set to drop another $25 once the electronic system has been implemented in 2018.
New Iowa Motor Vehicle Dealer Bond Requirement
As of July 1, 2016 new auto dealers who wish to become licensed in Iowa and obtain an Iowa dealer license must post a $75,000 dealer bond instead of the $50,000 bond required until now.
Along with the increase in bonding amount, the Senate File also spells out a number of instances which can lead to a claim against the bond. Causes for a claim include not complying with all state statutes that are applicable to car dealers, and in particular the provisions in Chapter 321 of the Code and the aforementioned Senate File.
For example, customers who have not been furnished with a valid certificate of title when buying a new car or who find that the dealer has not complied with the odometer requirements specified in 321.71 can file a claim against the bond and request compensation.
In return, if the claim is valid, the surety must indemnify claimants up to the full amount of the surety bond. Once a claim has been settled, the bonded car dealer must repay the surety for the compensation it has extended.
How to Reduce Your Bond Premium
The change in bonding amount means that everyone obtaining a new bond will see a change in their premiums. The change in premium is due to the change in the total bond amount, since premiums are a percentage of it.
While this increase in premium can’t be avoided , applicants can still lower their premium by improving their credit score over time. In addition, applicants whose business and personal financial statements are showing strong finances can also expect to receive a lower bond quote.
Working with the proper bonding agency is important because often your premium will depend on the sureties that your agency works with. If your agency does not have access to A-rated or T-listed sureties, chances are that your premium will be higher. Therefore, picking an agency like Bryant Surety Bonds, that has access to the best-reputed surety bond companies is sure to have an effect on your premium.
Need to Get Bonded?
Do you need to get an Iowa motor vehicle dealer bond? Get a free quote on your bond through our online application. Just submit your form and we will get in touch with you shortly about your bond quote. For any questions you may have, do not hesitate to call us at 866.450.3412.