A bond is going to cover losses or claims that an auto dealer could generate. The possible claimants tend to the be the DMV
for incurred fines and late fees that dealers rack up.
Dealer customers are usually next up on the list of potential claimants. When we say dealer customers, this includes the public or other dealers. Wholesale dealers that sell vehicles to other car dealers often do so on hand-shakes after a certain level of trust is built. This type of arrangement can lead to claims if that wholesaler gets into a financial pickle. Those hand-shakes are suddenly not worth anything and claims arise.
Auto Auctions, banks, and other lending institutions are also another large source of bond claims in 2018. These claims happen when DMV dealers default on their loan payments.
Surety Bond Language required by the DMV:
This is an excerpt taken from the Occupation License Form 25 (aka OL25):
WHEREAS, section 11710, Vehicle Code, requires that the Principal file or have on file with the Department a bond in the sum of $50,000
and this bond is executed and tendered in accordance therewith.
NOW THEREFORE, the conditions of the foregoing obligation are that if the Principal shall not practice any fraud or make any fraudulent
the representation which will cause a monetary loss to a purchaser, seller, financing agency, or governmental agency
; and, shall not fail to comply with
conditions set out in section 11711, then this obligation is to be void; otherwise, it is to remain in full force and effect.