Louisiana Used Auto Dealer Bond: A Comprehensive Guide

October 20th, 2020

This guide provides information for insurance agents to help pre-owned car dealership owners on Louisiana Auto Dealer bonds

At a Glance:

• Average Cost: $450 – $3,903 for a two-year term, based on the business owner’s credit
• Bond Amount: $50,000
• Who Needs It: All individuals and businesses that sell or deal in 5 or more used motor vehicles in a 12 month period
• Purpose: To ensure the public will receive compensation for any damages should the auto dealer fail to comply with dealer licensing law
• Who Regulates Dealers in Louisiana: The Used Motor Vehicle Commission (UMVC)

Background

Louisiana Revised Statutes 32:1254 mandates used auto dealers operating in the state to obtain a motor vehicle dealer license with either the UMVC. The Louisiana legislature enacted the license and regulations to ensure that dealers engage in ethical business practices and remit required taxes and fees. In order to provide financial security for the enforcement of the license law, dealers must purchase and maintain a $50,000 surety bond to be eligible for licensure.

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What is the Purpose of the Louisiana Auto Dealer Bond?

Louisiana requires dealers to purchase the Motor Vehicle Dealer Bond as part of the application process for the Motor Vehicle Dealer License. The bond ensures that the public will receive compensation for financial harm if the auto dealer fails to comply with the licensing regulations and that the dealer will pay all required taxes and fees to the State of Louisiana. In short, the bond is a type of insurance that protects the public if the dealer breaks licensing laws.

How Can an Insurance Agent Obtain a Louisiana Auto Dealer Bond?

BondExchange makes obtaining a Louisiana Auto Dealer Bond easy. Simply login to your account and use our keyword search to find the “auto dealer” bond in our database. Don’t have a login? Enroll now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone (800) 438-1162, email, or chat from 7:30 AM to 7:00 PM EST to assist you.

At BondExchange, our 40 years of experience, leading technology, and access to markets ensure that we have the knowledge and resources to provide your clients with fast and friendly service whether obtaining quotes or issuing bonds.

How Much Does the Louisiana Auto Dealer Bond Cost?

The $50,000 Louisiana Motor Vehicle Dealer surety bond can cost anywhere between $450 to $3,903 for a two-year term. Insurance companies determine the rate based on a number of factors including your customer’s credit score and experience. We also offer easy interest-free financing for premiums over $500. The chart below offers a quick reference for the approximate bond cost on the $50,000 bond requirement.

$50,000 Louisiana Used Auto Dealer Bond Cost

*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to, years of experience and underlying credit factors contained within the business owner’s credit report.

How Does Louisiana Define “Used Motor Vehicle Dealer”?

Louisiana Revised Statutes 32:1252 defines a used motor vehicle dealer as anyone “whose business is to sell, or offer for sale, display, or advertise used motor vehicles, recreational products, or specialty vehicles.” Exemptions to this definition include:

• Any individual acting under a court order
• Public officers performing official duties
• Anyone selling a used motor vehicle obtained as collateral for a mortgage or security agreement (can’t have a car lot or employ and motor vehicle salespersons)
• Insurance companies who acquire used motor vehicles through their regular course of business (can’t have a car lot or employ and motor vehicle salespersons)

How Do Dealers Apply for a Motor Vehicle Dealer License in Louisiana?

The process for applying for a motor vehicle dealer license in Louisiana is pretty complex. Below are the general guidelines, but dealers should refer to the Requirements Package for details on the process. Dealers should also utilize the UMVC’s FAQ page for more information.

License Period – The Louisiana Used Dealer License is valid for two years and expires on December 31st every other year. The Salesperson License must be renewed annually. Louisiana designates the license renewal period by the district. Districts 1, 2, and 3 renew their license during odd-numbered years (2021, 2023, 2025, etc), and Districts 4 and 5 renew their license in even-numbered years (2020, 2022, 2024, etc). Dealers should examine the UMVC district map featured below to determine their renewal period.

Step 1 – Determine the License Type

Louisiana requires dealers to obtain specific licenses corresponding to the nature in which the dealer’s business operates. Keep in mind that dealers will need to acquire a license for each type of business they wish to operate. Below are the different types of the Louisiana Used Dealer License.

• • Used Dealer – Sells used motor vehicles to the general public
  • Crusher – Renders motor vehicles into a state where they cannot be used or rebuilt
  • Automotive Dismantler and Parts Recycling License – Sells rebuilt, wrecked, abandoned, or repairable motor vehicles wholesale only
  • Rent Option to Purchase – Rents used motor vehicles and gives the renter the option to purchase the vehicle
  • Daily Rental – Rents used motor vehicles on a day by day basis
  • Auction – Sells used motor vehicles at an auction
  • Used Parts and Accessories – Sells used motor vehicle parts and accessories
  • Salesperson – Sells used motor vehicles directly

***Dealers will need to obtain an Additional Location License for each additional business location.***

Step 2 – Establish a Location

Dealers are required to establish a permanent place of business that meets the following minimum requirements:

• • Has a suitable office
  • Permanently affixed sign that is at least 16 square feet, signifies that used motor vehicles are sold at this location, and is clearly visible from the nearest public street
  • A telephone number listed in the business’s name
  • Complies with all local zoning ordinances

Dealers must have their local zoning official sign a Zoning Verification Form and then submit it with their application.

Step 3 – Acquire Insurance

• • Dealers must acquire garage liability insurance with a minimum limit of $55,000 and submit a Certificate of Insurance with their Application.
  • Rent with the Option to Purchase dealers must acquire rental insurance with minimum limits of:
    • $100,000 per person
    • $300,000 per accident
    • $50,000 for property damage
  • Daily Rental dealers must acquire rental insurance with minimum limits of:
    • $15,000 per person
    • $30,000 per accident
    • $25,000 for property damage

Step 4 – Purchase a Surety Bond

Dealers must purchase and maintain a $50,000 motor vehicle dealer surety bond. The bond must run concurrently with the dealer license and expire on December 31st of every other year (see District Map above for the schedule).

Step 5 – Complete the Application

All new dealer regulatory license applications and dealer regulatory license renewal applications should be mailed to:

Louisiana Used Motor Vehicle Commission
3132 Valley Creek Drive
Baton Rouge, Louisiana 70808

Dealers can access the Application Form here. The following information should be included with the application:

• • 5.a Dealer Training – Dealers must fill out and submit an Educational Training Seminar Session form and submit it with their application. After the dealer has submitted their application, they will be scheduled for the next available training seminar, which they must attend to receive their license.
  • 5.b Rental Purchase Agreement – Rent with the Option to Purchase Dealers must submit a blank copy of their rental-purchase agreement with their application
  • 5.c Salesperson Application – Every dealership must have at least one licensed salesperson. Dealers can submit a Salesperson Application with their dealer application.
  • 5.d Picture – Dealers must submit a photograph of their sign with their application

Step 6 – Pay Fees

The following fees are associated with obtaining a Louisiana Used Dealer License:

• • $400 application fee for dealers
  • $200 application fee for each additional location
  • $25 application fee for a Salesperson License

Step 7 – Pass Inspection

After the dealer has submitted their application, a representative from the UMVC will contact them to schedule an inspection of their business location to ensure the location meets all minimum requirements

***Applicants who have been convicted of either a misdemeanor or felony within ten years of their application submission must pay a $35 background check fee.***

How Do Louisiana Auto Dealers Renew Their License?

The Louisiana Used Dealer License is valid for two and expires on December 31 every other year. The Salesperson License must be renewed annually. Dealers should complete the Renewal Application and mail all required forms (including a continuation certificate for their bond) and fees to the following address:

Louisiana Used Motor Vehicle Commission
3132 Valley Creek Drive
Baton Rouge, Louisiana 70808

What Are the Insurance Requirements for the Louisiana Auto Dealer License?

The State of Louisiana requires dealers to obtain garage liability insurance with a minimum limit of $55,000. Rent with the Option to Purchase dealers must acquire auto liability insurance with minimum limits of 100/300/50, and Daily Rental dealers must acquire auto liability insurance with minimum limits of 15/30/25. Dealers must also file a $50,000 motor vehicle dealer surety bond.

How Do Louisiana Auto Dealers File Their Bond?

The $50,000 Auto Dealer surety bond requires signatures from both the surety company that issues the bond and the auto dealer. The bond form will require the following items:

• The legal name of entity/individual(s) buying the bond
• Physical address where the business will operate
• Business type (corporation, LLC, etc)
• Date the bond goes into effect and the date it will expire

Dealers should mail the completed bond form, including the power of attorney, to the following address:

Louisiana Used Motor Vehicle Commission
3132 Valley Creek Drive
Baton Rouge, Louisiana 70808

How Can Louisiana Auto Dealers Avoid Bond Claims?

To avoid claims on the Motor Vehicle Dealer Bond, dealers must follow all dealer regulations in the state, including some of the most important issues below that, tend to cause claims:

• Do not engage, or allow representatives of the business to engage, in any acts of fraud
• Pay sellers of vehicles promptly and in full
• Honor all contracts related to the sale of used motor vehicles
• Do not engage in any illegal selling practices

What Other Insurance Products Can Agents Offer Dealers in Louisiana?

Louisiana requires used motor vehicle dealers to obtain garage liability insurance. Most reputable dealers that provide towing or service station services should also obtain garage keeper’s liability. Dealers who rent motor vehicles must obtain comprehensive auto liability insurance. Bonds are our only business at BondExchange, so we do not issue any form of liability insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.

How Can Insurance Agents Prospect for Louisiana Used Auto Dealer Customers?

Louisiana conveniently provides a public database to search for active motor vehicle dealers in the state. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.

What Other States Require Auto Dealer Bonds?

All 50 states and the District of Columbia require auto dealers to obtain an Auto Dealer Bond as a prerequisite for licensure. Insurance agents should utilize our Main MVD Page for a detailed analysis of the Auto Dealer Bond requirements nationwide.