Montana Auto Dealer Bonds
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 Montana auto dealer bond needs.
What Are They?
Montana auto dealer bonds serve two important purposes that are essential to maintaining a well-regulated auto sales industry in the state. They provide recourse for those incurring a financial loss due to the unlawful or unethical business practices of licensed auto dealers operating within the state.
First, a Montana auto dealer bond requires the dealer purchasing it to do business in full compliance with the laws and statutes governing the industry. Second, in the event of noncompliance that causes financial harm to either the state or a consumer, the auto dealer bond provides a source of funds for compensating the injured party for such damages.
Who Needs Them?
Montana’s Motor Vehicle Division issues dealer licenses in three broad classes that are based on what vehicles are sold and to whom, and applicants for any of them are required to furnish a Montana auto dealer bond as part of the licensing (or license renewal) process.
The required bond amount depends on the dealer license class. The most common type of license (for franchise, used vehicle, auction, and wholesale dealers, as well as dealers selling new manufactured homes) requires a $50,000 Montana auto dealer bond. These bonds have a term of one year and must be renewed by December 31 of each year.
Speak with a Surety Bond Professionals agent today to discuss your bonding needs.
How Do They Work?
Like virtually every type of surety bond, a Montana auto dealer bond is legally binding on the three parties to the surety bond agreement:
- the “obligee” requiring the bond (the Montana Title and Registration Bureau),
- the “principal” purchasing the bond (the dealer), and
- the “surety” guaranteeing the bond.
When the principal fails to remit taxes to the state, or when the principal intentionally defrauds a consumer, the injured party can file a claim against the bond to recover damages. Although the principal is legally obligated to pay any claim the surety determines is valid, that doesn’t mean the principal will write out a check to the claimant. Because the surety has guaranteed the payment of claims, the usual practice is for the surety to pay the claim initially and be repaid later by the principal.
Failure to repay that debt can result in the surety taking legal action against the principal. That means the principal could end up paying court costs and legal fees as well as the amount of the claim paid by the surety on the principal’s behalf.
What Do They Cost?
The formula for calculating the annual premium for a Montana auto dealer bond is simple: multiply the $50,000 bond amount by the premium rate established by the surety. The premium rate is set on a case-by-case basis, the primary consideration being the risk that the principal won’t repay the surety for claims paid on the principal’s behalf. That risk is measured by the principal’s personal credit score.
A high credit score suggests that there is little risk of the principal not repaying the surety, so the premium rate will be low. On the other hand, a low credit score is indicative of a greater risk to the surety, so the premium rate will be higher. Depending on the underwriters’ risk assessment, premium rates can be anywhere from less than one percent to as high as three percent.
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Our surety bond professionals will get you the Montana auto dealer bond you need at a competitive rate.