Hawaii Auto Dealer License Guide
In this article, we’ll walk you through everything you need to get a Hawaii car dealer license.
Surety Bond Professionals is a family owned and operated bonding agency with over 30 years of experience. Our expert agents are ready to assist with all your Hawaii car title bonds needs.
What Are the Different Types of Hawaii Auto Dealer Licenses?
The Hawaii Department of Commerce and Consumer Affairs, Professional & Vocational Licensing Division, licenses all the state’s motor vehicle dealers. However, the license types and licensing procedures vary depending on whether the dealer will be operating in Honolulu County or on another island.
The three main categories are new vehicle dealers, used vehicle dealers, and auction dealers, with the new and used vehicle categories subdivided into licenses for Honolulu dealers and licenses for dealers on other islands. Auction dealer licenses are the same for all islands. This article focuses on the most common license type—Honolulu licenses for used vehicle dealers.
What Are the Steps in the Licensing Process?
You can download the application for a Hawaii used vehicle dealer license, which includes instructions for completing it and a checklist of required documents. Among those documents are:
- A copy of the rental agreement or lease for the dealership location (unless you own the premises)
- A self-inspection report including sketches and photos as described in the document checklist
- A current financial statement
- A line of credit or Hawaii auto dealer bond
- A check made out to Commerce and Consumer Affairs for the application and license fees
Regardless of when you receive your dealer license, it must be renewed by June 30 of each even-numbered year.
Why is a Hawaii Auto Dealer Bond Required?
If you sell less than 60 vehicles per month annually, you have the option of providing either a letter of credit in the amount of $50,000 or a surety bond in the amount of $25,000. If your monthly sales average 60 or more vehicles, your option is to provide a $500,000 line of credit or a $100,000 Hawaii auto dealer bond. Few dealers are willing and able to tie up that much credit, making the surety bond the preferred option.
A Hawaii auto dealer bond is legally binding on all three parties involved:
- The Department of Commerce and Consumer Affairs (known as the bond’s “obligee”),
- The used vehicle dealer (the “principal”), and
- The party guaranteeing the bond (the “surety”).
The bond is the principal’s guarantee to comply with the statutes through which Commerce and Consumer Affairs regulates auto dealing in Hawaii. The principal is legally obligated to pay any valid claims filed by Commerce and Consumer Affairs or by a member of the public for financial damages incurred as a result of the principal’s unlawful or unethical business conduct.
This combination of guaranteed compliance with the law and compensation of the injured party in the event of noncompliance by the principal helps preserve the integrity of Hawaii’s auto dealing industry and promotes consumer confidence in it.
How Are Hawaii Auto Dealer Bond Claims Paid?
Although the principal bears the full legal obligation to pay valid claims against a Hawaii auto dealer bond, it’s the surety that pays them initially. As the bond’s guarantor, the surety takes responsibility for writing the check to the claimant to resolve the matter promptly. That creates a debt to the surety that, if not repaid by the principal, can result in the surety taking legal action to recover.
How Much Does a Hawaii Auto Dealer Bond Cost?
Hawaii auto dealer bonds are sold for an annual premium that is a small percentage of the required bond amount, that percentage being the premium rate set by the surety at the time the bond is purchased. What that premium rate will be depends on how risky the underwriters think it is for the surety to pay claims on the principal’s behalf. That risk is measured by the principal’s personal credit history.
A creditworthy principal, someone with a high personal credit score, is likely to repay the surety in a timely fashion and therefore deserves a low premium rate, usually no more than 1-2%. A low credit score, on the other hand, suggests a higher risk level and results in a higher premium rate.
Our surety bond professionals will get you the Hawaii car dealer bond you need at a competitive rate.