What is a Montana Auto Dealer Bond?
In Montana, similar to many other states around the country, motor vehicle dealerships must have a license to operate a business legally. Part of the requirements involved in obtaining an auto dealer license is securing a Montana auto dealer bond. Unlike insurance for the business, an auto dealer bond works as a form of protection for customers and the state against fraudulent or illegal business practices of the dealership.
When financial loss is incurred due to misleading a customer or other bad acts by the dealership, a claim can be made against a Montana auto dealer bond for compensation for those losses. Auto dealers operating in Montana must have this bond to ensure they comply with the law.
Who Needs a Montana Auto Dealer Bond?
Motor vehicle dealers operating in the state of Montana may come in many different forms, most of which require an auto dealer bond. Individuals or businesses that engage in the act of selling or buying new or used vehicles, including trailers, motor homes, recreational vehicles, and motorcycles, must have a Montana auto dealer license.
Montana Auto Dealer Bond Obligee Details
Like all other surety bonds, a Montana auto dealer bond brings together three parties under a contract. The licensed auto dealer required to secure a bond is known as the principal. A surety company provides the bond based on the state laws governing auto dealers in Montana. The third party in the contract is the licensing agency responsible for overseeing compliance with auto dealer laws in the state.
Auto dealers obtaining a Montana auto dealer bond have the following obligee:
Montana Department of Justice
Motor Vehicle Division
1003 Buckskin Drive
Deer Lodge, Montana 59722
How Much Does a Montana Auto Dealer Bond Cost?
The cost of a Montana auto dealer bond varies from one individual or dealership to the next. This is because pricing for bonds is based on a few different factors. The first is the total amount of the bond required by the obligee. Depending on the type of dealership you operate, a bond of up to $50,000 may be required. Franchise and wholesale dealers, auction dealers, and new manufactured home dealers must have a $50,000 bond. Franchise dealers for motorcycles of quadricycles require a $15,000 bond. Recreational vehicle dealers may need to secure a bond of $5,000.
Fortunately, the amount of the bond required is not the price an auto dealer pays for the bond. Instead, the surety company prices bonds as a percentage of the bond total, known as the bond premium. Bond premiums for Montana auto dealers range from 1 to 10%. Auto dealers that have less than ideal financial or credit history are likely to pay a higher bond premium than those with a strong financial track record.
How do You Get a Montana Auto Dealer Bond?
Getting a Montana auto dealer bond is a straightforward process. Once you know the type of bond you need, submit a brief online application to the surety company to get a bond quote. The surety company provides the price for the bond and steps for completing the process. Montana auto dealer bonds must be renewed each year by December 31st.