Why Would You Need A Surety Bond For A Motorcycle Purchase?

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Why would you need a surety bond for a motorcycle purchase?

There are several reasons why you might need a surety bond for motorcycle purchase or an M-2 title bond. Perhaps the biggest reason is that it’s required by law.

The Maryland Vehicle Law states that ” A […] dealer may not sell any vehicle without first obtaining one of the following: A certificate of title; An M-1, M-2, or M-3 form; or With respect to a new motorcycle, a manufacturer’s or importer’s certificate.” This basically says that if you buy a used motorbike in Maryland (unless it has an existing MSO issued), then your dealer will need to provide you with some sort of surety bond before they can release the bike. If they don’t issue one, they are breaking the law.

A second reason you might need a surety bond for motorcycle purchase is that it’s required by your bank or lender. If you go to apply for a loan on any type of vehicle or piece of equipment, your lending institution will more than likely require some sort of financial guarantee that the item in question isn’t stolen and hasn’t been used as collateral on another loan.

A third reason you might need a surety bond for motorcycle purchases is simply that the dealer requests it from their customers. This is something that varies on an individual basis but some dealers do request this type of surety bond before allowing their client to walk out with their new bike. 

Why are surety bonds required?

Surety bonds are required in cases like this because they act as a form of protection to both the dealer and their client. If for some reason it is found out that the bike was stolen or used as part of another person’s loan application, then funds paid over by the buyer will be covered by the surety bond provider. This will protect both the dealer and the buyer in case of theft or fraud.

The other reason that surety bonds are required is that they act as proof that the bike has been properly titled before delivery to the new owner. When you purchase a motorcycle, it must be titled with your local government offices, usually the Secretary Of State (or equivalent). This process takes between 7 to 15 days depending on which state you live in. 

After this time period has passed (without any issues) then the dealership can issue an M-2 title bond which acts as proof that the vehicle has been legally transferred into your name. The dealership will need a copy of your original MSO along with your out-of-state registration before they can issue one of these forms  (so be sure to keep it with you when you go to purchase your new bike).

Who benefits from a surety bond?

Both the dealer and the buyer benefit from a surety bond when it comes to buying a used motorcycle. The dealer gets some form of protection in case someone like the police, your bank, or another lending institution finds out that it is stolen and they can’t legally hand over ownership (remember—the dealership will be fined for this). The buyer also benefits because they get added security knowing that if something goes wrong along the way, then their money will be refunded by the surety bond provider. 

After all, you just spent several thousand dollars on a new bike and you wouldn’t want to lose that money if something happens to it after you’ve left with it. Adding a surety bond to your purchase gives you an extra layer of protection and ensures that both you and the dealer end up satisfied.

Is a surety bond refundable?

Yes—if you buy a surety bond and decide within the first 15 days to take it back, then you get every penny of your money returned. This period of time is set by the surety bond provider and there is no way to get around it. If you purchase a used motorcycle and 5 days later decide that you don’t want it, then the dealership will issue a refund for your surety bond and take back their bike.

Once the 15 days have passed, however, then it’s no longer possible to get a refund on your surety bond. This doesn’t mean that they won’t still take the bike back but instead of sending you a check for every cent you put down towards the purchase they will issue an M-2 form with your name written in where it originally said “seller.” 

If there are any deductions made from this M-2 then they are listed underneath the section entitled “explanation of deductions.” Whereas refunds are instant once those fifteen days have passed, most dealers will send out their M2 forms within 30 days after purchase.

Do you get your money back from a surety bond?

Yes—the whole amount. This is because surety bonds are refundable up to 15 days after purchase, whereas most other forms of insurance only cover the first 30 days that you own your bike. If something were to happen during those 30 days then it wouldn’t be covered by any form of insurance and the dealership would have to eat the loss. By adding a surety bond onto your purchase you are ensuring that if something goes wrong during this initial 30-day period, then funds paid towards your new motorcycle will be reimbursed.

What happens if I don’t buy a surety bond?

If you decide not to buy a surety bond before buying your used motorcycle, then there is no way for you to get your money back if something goes wrong—even during the first 15 days. This puts you at risk of losing your entire investment in case there is a problem with title or registration information that isn’t discovered until later down the line.

A surety bond acts as an added layer of security for both buyer and seller, ensuring that everyone associated with this transaction gets paid off smoothly if anything goes wrong. It’s well worth it to add one to your motorcycle purchase so that you don’t have to worry about what might happen after leaving the dealership with your brand new bike!

To know more, check out Executive Surety Bonds now!

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