Montana Auto Dealer Bond: A Comprehensive Guide

November 16th, 2020

This guide provides information for insurance agents to help new and pre-owned car dealership owners on Montana Auto Dealer bonds

At a Glance:

• Average Cost: $250 – $4,500 per year for the $50,000 bond, based on the business owner’s credit
• Bond Amount: 
  • $5,000 for watercraft, snowmobile, and off-highway vehicle dealers
  • $15,000 for motorcycle and quadricycle dealers
  • $50,000 for all other dealer types
• Who Needs It: All individuals and businesses that sell or deal in motor vehicles
• Purpose: To ensure the public will receive compensation for financial harm if an auto dealer fails to comply with dealer licensing law
• Who Regulates Dealers in Montana: The Montana Department of Justice, Motor Vehicle Division (MVD)

Background

Montana Statute 61-4-101 mandates auto dealers operating in the state to obtain a motor vehicle dealer license with the MVD. The Montana legislature enacted the license and regulations to ensure that dealers engage in ethical business practices and remit required taxes and fees. In order to provide financial security for the enforcement of the license law, dealers must purchase and maintain either a $5,000, $15,000 or $50,000 motor vehicle dealer surety bond to be eligible for licensure.

What is the Purpose of the Montana Auto Dealer Bond?

Montana requires dealers to purchase the Motor Vehicle Dealer Bond as part of the application process for the Motor Vehicle Dealer License. The bond ensures that the public will receive compensation for financial harm if the auto dealer fails to comply with the licensing regulations. In short, the bond is a type of insurance that protects the public if the dealer breaks licensing laws.

How Can an Insurance Agent Obtain a Montana Auto Dealer Surety Bond?

BondExchange makes obtaining a Montana Auto Dealer Bond easy. Simply login to your account and use our keyword search to find the “auto dealer” bond in our database. Don’t have a login? Enroll now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone (800) 438-1162, email, or chat from 7:30 AM to 7:00 PM EST to assist you.

At BondExchange, our 40 years of experience, leading technology, and access to markets ensure that we have the knowledge and resources to provide your clients with fast and friendly service whether obtaining quotes or issuing bonds.

How Much Does the Montana Auto Dealer Bond Cost?

The Montana Motor Vehicle Dealer surety bond can cost anywhere between 0.5 to 9% of the bond amount per year. Insurance companies determine the rate based on a number of factors including your customer’s credit score and experience. We also offer easy interest-free financing for premiums over $500. The chart below offers a quick reference for the approximate bond cost on the $50,000 bond requirement.

$50,000 Montana Auto Dealer Bond Cost

*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to, years of experience and underlying credit factors contained within the business owner’s credit report.

How Does Montana Define “Motor Vehicle Dealer”?

To paraphrase Montana Statute 30-11-701, a motor vehicle dealer is an individual or business entity who manufactures, sells, or deals in new or used motor vehicles either directly or indirectly.

How Do Auto Dealers Apply for a License in Montana?

The process for applying for a motor vehicle dealer license in Montana is pretty complex. Below are the general guidelines, but dealers should refer to the Dealer Requirements Form, or contact the MVD at (406) 444-3661 for details on the process.

License Period – The Montana Auto Dealer license expires on December 31 of each year and must be renewed by the expiration date.

Step 1 – Determine the License Type

Montana requires dealers to obtain specific licenses corresponding to the nature in which the dealer’s business operates. Keep in mind that dealers will need to acquire a license for each type of business they wish to operate. Below are the different types of Montana dealer licenses.

• • Franchise Dealer – Sells new and used motor vehicles
  • Used Dealer – Sells used motor vehicles only
  • Wholesale Dealer – Sells motor vehicles to other licensed dealers only
  • Auto Auction Dealer – Sells motor vehicles in an auction
  • Broker Dealer – Negotiates the purchase or sale of a motor vehicle on behalf of a client
  • New Manufactured Home Dealer – Sells new manufactured homes

***The remaining steps will focus exclusively on how to obtain the Used Dealer License. Dealers can examine the Dealer Requirements Form for information on how to obtain all other license types.***

Step 2 – Establish a Location

Dealers are required to establish a permanent place of business that meets the following minimum requirements:

• • Building capable of storing all required documents and records
  • Used for commercial purposes only
  • Has a display lot capable of displaying all motor vehicles offered for sale
  • Permanently affixed sign indicating the business name in letters at least 6 inches in height and is visible from a minimum distance of at least 150 feet

Step 3 – Obtain Zoning Approval

Dealers will need to obtain written approval from their local zoning authority certifying that their business location is in compliance with all applicable zoning regulations. Dealers should submit this approval with their application.

Step 4 – Purchase Insurance

All dealers are required to purchase and maintain liability insurance (limits not specified) and submit proof of insurance with their application

Step 5 – Purchase a Surety Bond

Dealers must purchase and maintain  a surety bond in amounts based on the license type:

• • $5,000 for watercraft, snowmobile, and off-highway vehicle dealers
  • $15,000 for motorcycle and quadricycle dealers
  • $50,000 for all other dealer types

Step 6 – Complete the Application

All dealer regulatory license applications should be mailed to the following address:

Motor Vehicle Division
Title and Registration Bureau
1003 Buckskin Drive
Deer Lodge, MT 59722-2375

• • 6.a Photographs – Dealers will need to submit at least two photographs and a diagram of their business location

Step 7 – Pay Fees

Used dealers will need to pay a $30 application fee when submitting their license application.

How Do Montana Auto Dealers Renew Their License?

The Montana Dealer license expires on December 31 of each year and must be renewed by the expiration date.

Dealers will need to mail the completed renewal application to the following address:

Motor Vehicle Division
Title and Registration Bureau
1003 Buckskin Drive
Deer Lodge, MT 59722-2375

What Are the Insurance Requirements for the Montana Auto Dealer License?

The State of Montana requires all dealers to purchase and maintain any liability insurance (limits not specified). Dealers must file either a $5,000, $15,000 or $50,000 motor vehicle dealer bond.

How Do Montana Auto Dealers File Their Bond?

Dealers should mail the completed bond form, including the power of attorney, to the following address:

Motor Vehicle Division
Title and Registration Bureau
1003 Buckskin Drive
Deer Lodge, MT 59722-2375

The Montana Auto Dealer surety bond requires signatures from both the surety company that issues the bond and the auto dealer. The bond form will require the following items:
Legal name and location of the entity/individual(s) buying the bond

• Surety company’s name
• Bond amount
• Bond type
• Date the bond is signed
• Notary signature for the surety company

How Can Montana Auto Dealers Avoid Bond Claims?

To avoid claims on the Motor Vehicle Dealer Bond, dealers must follow all dealer regulations in the state, including some of the most important issues below that, tend to cause claims:

• Do not engage, or allow representatives of the business to engage, in any acts of fraud
• Pay sellers of vehicles promptly and in full
• Do not engage in any illegal selling practices

What Other Insurance Products Can Agents Offer Dealers in Montana?

Montana requires all dealers to obtain garage liability insurance. Bonds are our only business at BondExchange, so we do not issue any form of liability insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.

How Can Insurance Agents Prospect for Montana Auto Dealer Customers?

Montana unfortunately does not display motor vehicle dealer information to the public. We suggest contacting a list service company or the Montana Secretary of State for a list of active motor vehicle dealers. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.

What Other States Require Auto Dealer Bonds?

All 50 states and the District of Columbia require auto dealers to obtain an Auto Dealer Bond as a prerequisite for licensure. Insurance agents should utilize our Main MVD Page for a detailed analysis of the Auto Dealer Bond requirements nationwide.