New Mexico Auto Dealer Bonds
Learn everything you need to know about New Mexico Auto Dealer bonds, and get bonded today with Surety Bond Professionals.
What Are They?
Like most states, New Mexico requires a surety bond as a condition for licensing as an auto dealer. The purpose of the bond is twofold:
- It serves as the dealer’s guarantee to conduct business in a lawful and ethical manner.
- It provides funds to compensate consumers who suffer a financial loss as the result of the dealer’s failure to comply with applicable laws and ethical standards.
To avoid revocation of your auto dealer license, you must maintain a current bond at all times.
Here’s a quick look at the most important information about New Mexico motor vehicle dealer bonds:
- Required Bond Amount: $50,000
- Premium: $500 minimum
- Effective Date: April 1, 2020
- End Date: March 31 of next even-numbered year
Who Needs Them?
New Mexico issues several different types of auto dealer licenses. All of them require the purchase of a New Mexico auto dealer bond. Anyone who sells more than four cars in a single 12-month period must apply for a license from the New Mexico Division of Motor Vehicles and provide a $50,000 auto dealer bond as part of the application process.
How Do They Work?
There are three parties to the surety bond agreement:
- The party requiring the bond, the New Mexico Division of Motor Vehicles, is known as the obligee.
- The party required to purchase the bond, the dealer, is referred to as the principal.
- The company that underwrites and issues the bond is called the surety.
The surety bond agreement is a legally binding contract that assigns specific rights and obligations to each party.
What Happens If a Claim is Filed?
When the principal violates the terms of the agreement, a claim can be filed against the bond by the DMV or by a consumer who has suffered a financial loss. The surety will investigate the claim to make sure it is valid before it moves into the payment process.
The principal bears sole legal responsibility for paying valid claims against the bond. Ideally, the principal would make immediate payment to the claimant. However, that often is not feasible. In many cases, the principal will need some time to pull together the funds, so the surety will step up and make the payment on the principal’s behalf.
That advance payment is essentially a short-term loan to the principal, because the principal, not the surety, is legally responsible for the debt. Consequently, the principal must reimburse the surety.
What Do They Cost?
The annual premium for any surety bond is a small percentage of the required amount. While the DMV has established the required bond amount as $50,000 for New Mexico car dealer bonds, the surety sets the premium rate for each bond applicant on a case-by-case basis.
The primary factor considered in assigning a premium rate is the principal’s personal credit score, along with personal and business financial statements. The principal’s industry experience also comes into play as a predictor of the likelihood of claims being filed against the bond.
If you have good credit, you will likely pay a premium rate in the range of 1% to 3%, for an annual total of $500 to $3,000. If your credit is poor, you may pay a higher premium.
Get Bonded Today
You can count on Surety Bond Professionals to get you the bond you need to obtain or renew your license as a New Mexico auto dealer at a competitive rate. Request a quote online or call us today.