What is a Hawaii Auto Dealer Bond?
Several types of businesses must get a valid license in the state in which they operate. In Hawaii, auto dealers are required under current law to have not only a license, but an auto dealer bond. A Hawaii auto dealer bond works as a form of protection for the buying public, not the business, should the auto dealer fail to comply with rules and regulations.
A Hawaii auto dealer bond provides an avenue for compensation for customers who conduct business with a licensed auto dealer in the state and experience some form of financial loss. If an auto dealer is fraudulent in its business dealings or does not otherwise comply with the law, a claim can be made against a Hawaii auto dealer bond. Auto dealers are ultimately responsible for repaying these successful claims.
Who Needs a Hawaii Auto Dealer Bond?
Nearly all types of auto dealers operating in Hawaii are required to secure a Hawaii auto dealer bond. Both new and used vehicle dealers must post a bond, but the amount of the bond is based on the number of vehicles sold each month. Auto dealers also include motorcycle or scooter dealers, and a bond is required for these businesses or individuals as well.
Hawaii Auto Dealer Bond Obligee Details
Similar to other surety bonds, a Hawaii auto dealer bond represents a contract between three different parties. The surety company provides the bond to the licensed auto dealer, known as the principal of the bond. The obligee is the party requiring a bond to be in place, such as the state's licensing agency or department.
For Hawaii auto dealers, a bond's obligee is as follows:
Motor Vehicle Industry Licensing Board
PVL Licensing Branch
335 Merchant Street, Room 301
Honolulu, Hawaii 96813
How Much Does a Hawaii Auto Dealer Bond Cost?
One of the advantages to having an auto dealer bond in Hawaii is that it works as an alternative to securing assets or a line of credit as part of the licensing process. However, there is still a cost for a Hawaii auto dealer bond, based first on the amount of the bond in place.
New auto vehicle dealers that sell ten or more vehicles per month must have a $200,000 auto dealer bond. Those that sell less than ten vehicles per month must have a Hawaii auto dealer bond of $50,000. Used auto dealers that sell 60 or more vehicles per month need a $100,000 bond, while those that sell less must have a $25,000 bond. Motorcycle and scoot dealers need a $10,000 bond.
Fortunately, auto dealers do not pay this entire amount. Instead, the surety company providing the bond charges a percentage of the total bond, typically ranging from 1 to 10%. An auto dealer that is a lower risk to the surety company, meaning they have strong credit and a healthy financial track record, will pay a lower price for their Hawaii auto dealer bond.
How do You Get a Hawaii Auto Dealer Bond?
Getting a Hawaii auto dealer bond is a straightforward process that begins with a brief online application. Auto dealers who complete the application receive a quote for the price of the bond, and instructions on how to submit any follow-up information to complete the process. Hawaii auto dealer bonds need to be renewed in June of every even-numbered year to remain valid.