A Comprehensive Guide to Car Wash Bonds
In some states, there is more to operating a car wash than knowing where to buy the best car detailing supplies wholesale. Where they are required, car wash surety bonds must be purchased and maintained in order to run this type of service business.
What is the purpose of this bonding process and how much trouble will it be to obtain a new car wash bond?
What Is a Car Wash Surety Bond?
Like most bonds, car wash bonds are designed to offer some form of protection against misconduct or unintentional harm during service. Many business professionals need to obtain a bond to do business. This type of bond is called a license and permit bond.These bonds require that your business complies with state regulations, industry standards, and responsible practices. Keeping equipment in good repair and using quality car wash materials are examples of taking reasonable actions to prevent damage to customer vehicles.
Should a valid claim be filed against your business, the damaged party will be compensated out of the surety bond. Consider it a type of required insurance against damage claims by your employees, car wash, or detailing business customers.
Who Needs a Car Wash Bond?
Since 2014, car wash owners in the State of California and in New York City are required to have a car wash bond. Some of the detailed requirements include:
- In both cases, the amount of the required bond is $150,000.
- Bonds are required for businesses that clean vehicles, including washing, detailing, drying, polishing, vacuuming, or other cosmetic vehicle services.
- Bonds are required for businesses that use both automatic and hand car wash equipment.
- Even mobile on-demand car wash services must be bonded.
- In New York and California, the bond must also provide protection for employees in the case of unpaid wages or violations of working hours.
Who Doesn’t Need One?
If your state or local government does not require a car wash bond, you won’t have this added expense to maintain your business license. Even in California and New York City, you don’t need a car wash bond if:
- You operate a self-service-only facility where customers wash their own vehicles, even if you provide the supplies and Armor All wipes.
- You rent or repair vehicles as your primary business and only wash cars as an additional service after repair or before renting.
- The car wash is a temporary event designed to raise funds for a non-profit, such as a high school sports team or church car wash.
- Also, federal, state, or local government agencies are exempt from the bonding requirement.
The Cost of a Carwash Bond
While the amount of your car wash bond coverage (also called its “full penal sum”) needs to be $150,000, thankfully that is not how much you pay for it. The premium your business pays will be based on company financials and your credit score.
Those businesses with good credit scores will typically pay a premium between 1-4% of the total bond amount. This would equate to about $1,500-$6,000. While that would buy a lot of car detailing supplies wholesale, it is a necessary cost of doing business for some lucky car wash owners.
Can I Get a Car Wash Bond with Bad Credit?
Absolutely, you can get a car wash bond with less than perfect credit. As with most license and permit bonds, there are programs that will help you obtain a surety bond with bad credit.Premium rates will be higher for these programs, running between 2.5-10% of the bonded amount. Your business will still be able to afford the best car wash towels and supplies, although you may need to work the cost of bonding premiums into your pricing structure.
What if a Claim Is Made Against Your Car Wash Bond?
If at all possible, try to avoid having claims made against your bond. Working with customers to resolve complaints and keeping your commitments to your employees is always the most cost-effective practice.
However, a claim might be filed against you even if your business has been run perfectly. Maybe a customer objects to new car scents or brought in a vehicle with existing damage and now claims it occurred during the car wash.
In these cases, the bonding agency will investigate and even help you fight the claim in court. They don’t want to pay fraudulent claims any more than you do.
How Can You Reduce the Costs of Car Wash Bonding?
In some cases, it is possible to reduce the amount of the required bond by providing documentation of other comprehensive insurance, based on long-standing business reputation, through small business development programs, or by consenting to state monitoring.
In New York City, for example, the amount of the surety bond can be reduced to only $30,000 with an active monitoring agreement. Car wash owners who meet all licensing requirements must agree to the following to take advantage of this cost savings:
- To be subject to (at least) monthly monitoring visits by an independent observer
- To provide a fast resolution process for any employee disputes regarding wages or hours
- To comply with the Car Wash Accountability Law and Rules as outlined in the NYC administrative code
- To maintain and provide proof of commercial general liability insurance with at least $1,000,000 per occurrence and $2,000,000 aggregate coverage
- To satisfy any outstanding judgments, fines, or debts to NYC, business customers, or employees within 30 days
Choosing a Bonding Agency for Your Car Wash
Both the State of California and New York City provide a list of bonding agencies in their application information. However, they do not claim to list all available options, nor do they make any recommendations.
As you decide which agency to work with, keep these factors in mind:
- Look for large-volume bond writers who are licensed in your state.
- They should provide a free quote which is competitive to the others you receive.
- Check feedback ratings from other users.
- Investigate their claim management process and track record for successfully reducing or dismissing claims.
- Check with your professional car wash and detailing organizations for their recommendations.
Getting Back to Running Your Bonded Business
There certainly is some resistance to bonding requirements, and professional organizations and local businesses continue to lobby for reduced bonding requirements for car washes. These additional costs put a burden on start-ups and small businesses that may already have a tight profit margin.However, there is marketing value in advertising your business as a fully bonded car wash, which may bring additional customers to your door. Of course, your local competition is in the same boat as well. Finding other ways to improve your bottom line might be your best strategy to make up the difference.
Bringing Costs Down and Retail Sales Up
Is your commercial car wash buying car detailing supplies wholesale? Do you offer a wide variety of impulse buy and car care supplies for your customers to add on to their sale?
These are just a couple of ways that Superior Car Wash Supply can help your business save up for possible car wash surety bonds. We provide bulk pricing on everything your business needs, including these profitable retail items:
- Air fresheners
- Floor mats
- Car accessories
- Novelty gifts
- Chamois “shammy” cloths
- Microfiber towels