What the New Alabama Master Dealer License Will Change

You may not know it yet, but some significant changes are being made to your Alabama motor vehicle dealers license and surety bond requirements. Due to Alabama House Bill 393, effective October 31st of 2020, there will only be a single ‘Master License’. The Alabama Master Regulatory Dealer License will replace the New and Used Motor Vehicle Dealer, Rebuilder, Reconditioner, and Wholesaler Licenses. Regrettably, there are several other changes as a result of this new bill that we need to understand.

Front view of yellow Audi Coupe on display in a dealership with red Audi in the background

What Else Changes With The Master Dealer License?

We took the time to read the entirety of HB393, so we could highlight the most important changes. That said, here’s what you should know:

  • The Alabama Master Dealer license will be valid for a 1-year term, renewing October 1st of each year. 
  • There will be a 30-day grace period for licenses not renewed by Oct. 1st without penalty.
  • The required surety bond amount has been increased from $25,000 to $50,000.
  • The number of total combined dealer and motorcycle dealer license plates that NEW motor vehicle dealers can purchase has increased from 25 to 35.
  • The number of total combined dealer and motorcycle dealer license plates that USED motor vehicle dealers can purchase has decreased from 10 to 5.
  • New or used motor vehicle dealers who complete applications for certificates of title involving title transfers for at least 300 motor vehicles in this state during the previous licensed year may purchase a combined maximum total of 25 additional dealer and motorcycle dealer license plates.
  • When a standard plate is issued for a motor vehicle held in inventory by a licensed new or used motor vehicle dealer, there will be no motor vehicle ad valorem taxes or sales tax collected by the local issuing official.
  • Those that meet the license requirements who fail to obtain the Master Dealer License will be subject to a $500 penalty for the first violation and $1000 for any subsequent violations.

While we can’t force you, we do encourage you to read the entire bill to be fully aware of any changes that may affect you. I mean, nothing says ‘light reading’ like legislation… right? With October approaching, we want you to understand what these changes mean for your bond.

The Effects On Your Surety Bond

Understandably, surety bonds are something that cause many people confusion. A surety bond is a three-party contract between the Principal (you), the Obligee (the entity requiring you to get the bond), and the Surety (the insurance company who guarantees the bond). 

In the past, the Alabama Department of Revenue (the Obligee) required a $25,000 surety bond for motor vehicle dealers. Now—in addition to the new Master Dealer License—they will require a $50,000 surety bond. Upon the renewal of your license, the renewal of your bond will be unlike the year before.

Unfortunately, the Alabama Department of Revenue has made it abundantly clear that a rider— a change to the original bond—for the bond amount increase will not be accepted. As a result, your current surety bond will need to be canceled and rewritten. Not only that, but the Obligee now requires the bond to be written on a new bond form. The Obligee will pre-fill out the bond form and then provide it to you after you apply for your renewal.

As if that wasn’t enough to worry about, the bond amount increase will also change how much you pay.

What This Means for You

Not only will you need to get the new Master Dealer License, but you’ll need to increase your surety bond amount from $25,000 to $50,000. This change will likely double your current premium. So, let’s take a minute to understand why…

What you pay for your bond is your premium. The premium is usually a percentage of your bond amount. We call this percentage your premium rate. Your premium rate—usually ranging from 1-3%— is primarily based on your credit. The better your credit, the lower your rate and, therefore, the less you pay for your bond. 

To calculate your premium, multiply your premium rate by the bond amount. Say you had a premium rate of 1%. Your previous bond of $25,000 would have cost you $250. With that same premium rate of 1%, a $50,000 bond amount will cost you $500. So, your premium doubled even though your premium rate has not changed.

With this in mind, hopefully, you won’t be blindsided at the time of your renewal. Luckily, you still have time to prepare before your renewal deadline of October 1st!

What Should You Do Now?

We know there’s a lot of information about the changes coming with the Alabama Master Dealer License. It might seem a little overwhelming, but we’re here to make the next few steps easier.

First, you’ll want to apply for your license renewal at the Alabama Department of Revenue website. After you’ve done that, they will provide the bond form you need to get your new surety bond. When you have that, contact us here

We at EZsuretybonds.com want to help make this a seamless process for you. Now that you know the most important changes as a result of HB393, you should be ready to apply for your license renewal. If at any point you need help or have questions regarding the bonding process, call us at 1-866-546-4605 or visit our FAQ page. As always, we are here to serve you!