Surety Bond Professionals is a family owned and operated bonding agency with over 30 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your Maine auto dealer bond needs.
What Are They?
The Maine Department of the Secretary of State, Bureau of Motor Vehicles (BMV) issues 10 different types of auto dealer licenses, each of which requires the purchase of a Maine auto dealer bond.
The bonding requirement provides protection for the state and the public (both businesses and individual consumers) against financial loss resulting from the unlawful or unethical business conduct of licensed auto dealers. It accomplishes this by making dealers financially accountable and responsible for the consequences of failing to comply with applicable laws and regulations governing auto trading in Maine.
Who Needs Them?
All applicants for an auto dealer license from BMV must furnish an auto dealer bond in an amount ranging from $25,000 to $100,000 depending on their annual sales volume. The required bond amount increases incrementally by $25,000 for every additional 50 vehicles sold during the previous year up to the $100,000 maximum. It’s not unusual for a dealer to need more than one type of license, with each license requiring its own Maine auto dealer bond.
Maine auto dealer licenses are good for one year, after which they must be renewed. The same is true of Maine auto dealer bonds. Any dealer who allows their bond to expire without renewing or replacing it could have their license revoked.
Speak with a Surety Bond Professionals agent today to discuss your bonding needs.
How Do They Work?
Understanding how Maine auto dealer bonds work requires an understanding of the terminology used in the surety bond agreement.
- The bond’s “obligee”— the party requiring the purchase of an auto dealer bond — is BMV.
- The “principal” — the party required to purchase the bond — is the principal.
- The “surety” is the company guaranteeing the bond.
Let’s say that a consumer files a claim for damages because a dealer sold her a vehicle without disclosing that it had previously been damaged in a flood, costing her thousands of dollars for a new engine less than a month after the purchase. The surety determines that the claim is valid, and the terms of the auto dealer bond legally obligate the principal to pay all valid claims.
However, the principal probably won’t pay the claimant directly. As the bond’s guarantor, the surety will pay the claim and collect reimbursement from the principal. If the principal does not repay that debt, the surety can take legal action to recover not only the amount of the claim but court costs and legal fees as well.
What Do They Cost?
The annual premium for a Maine auto dealer bond is the product of two factors: the required amount of the bond and the premium rate. The surety sets the premium rate for each bond based on an underwriting assessment of the risk that the principal might not readily repay the surety for claims paid on the principal’s behalf. That assessment relies heavily on the principal’s personal credit score.
Selling a Maine auto dealer bond to a principal with a high credit score is viewed as a low risk because the principal has a history of honoring debts. Selling a bond to a principal with a low credit score is a different matter, as the risk of non-repayment is clearly higher.
So while someone with great credit might be assigned a premium rate as low as 1%, a bond applicant with poor credit will be given a much higher premium rate around 2-3%.
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Our surety bond professionals will get you the Maine auto dealer bond you need at a competitive rate.