Missouri Auto Dealer Bond: A Comprehensive Guide for Insurance Agents
September 17th, 2020
This guide provides information for insurance agents to help new and pre-owned car dealers on Missouri Auto Dealer bonds
At a Glance:
- Average Cost: $250 – $4,500 per year, based on the business owner’s credit
- Bond Amount:
- $50,000 for Auto Dealers (most common)
- $100,000 for Special Event Motor Vehicle Auction
- Who Needs It: Any individual or business who engages, either directly or indirectly in the sale of more than 6 new, used, or reconstructed motor vehicles or trailers in a single year
- Purpose: To ensure the public will receive compensation for any damages should the auto dealer fail to comply with dealer licensing law
- Who Regulates Dealers in Missouri: Missouri Department of Revenue, Motor Vehicle Bureau is in charge of licensure and regulation of motor vehicle dealers
Background
Missouri Statute 301.559 mandates auto dealers operating in the state to obtain a motor vehicle dealer license. The Missouri 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 a $50,000 motor vehicle dealer surety bond.
What is the Purpose of the Missouri Auto Dealer Bond?
Missouri requires dealers to purchase the Motor Vehicle Dealer Bond as part of the application process for the 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 and that the dealer will pay all required taxes and fees to the State of Missouri. 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 Missouri Auto Dealer Surety Bond?
BondExchange makes obtaining a Missouri 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, 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 ensures 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 Missouri Auto Dealer Bond Cost?
The $50,000 Missouri Auto Dealer surety bond can cost anywhere between $250 to $4,500 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.
| Credit Score* | Bond Cost (1 Year) |
|---|---|
| 749+ | $250 |
| 660 – 748 | $375 |
| 650 – 659 | $400 |
| 630 – 649 | $500 |
| 620 – 629 | $750 |
| 601 – 619 | $1,000 |
| 580 – 600 | $3,000 |
| 570 – 579 | $3,500 |
| 530 – 569 | $4,000 |
| 500 – 529 | $4,500 |
*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 Missouri Define “Motor Vehicle Dealer”?
The Missouri Dealer Operator Manual defines a motor vehicle dealer as anyone who sells, exchanges, leases or rents out six or more motor vehicles in a single calendar year. Exceptions to this definition are:
- Financial institutions
- Person who solely sells repossessed motor vehicles
- Disposing of vehicles used in the regular course of business
- Collectors of antique motor vehicles
How Do Auto Dealers Apply for a Motor Vehicle Dealer License in Missouri?
The process for applying for a motor vehicle dealer license in Missouri is pretty complex. Below are the general guidelines, but dealers should refer to the Dealer Operator Manual for details on the process.
License Period – The dealer license period expires on December 31st each year, and must be renewed prior to the expiration date for dealers to continue operations. There is no grace period for late renewals
Step 1 – Determine Dealer Type
Missouri 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 the Missouri Dealer License.
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- Dealer, Auction, Manufacturer – Dealers who sell, auction or manufacturer new or used vehicles
- Lease Rental – Dealers who operate as a leasing or rental company
- Salvage – Dealers who operate as a salvage business
- Title Service – Dealers who operate as an agent to obtain a certificate of ownership for a motor vehicle
- Transportation Network Company – Dealers who operate a transportation business
Step 2 – Establish a location
Before dealers can obtain their dealer license they must first buy or lease a permanent business location. The location must meet the following requirements:
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- Be a permanently enclosed building
- Contain space to store all records
- Have a working telephone that the public can call
- Have a display area, that is not a public street, to display multiple motor vehicles and is visible from the nearest street
- Be open at least 20 hours per week between the hours of 6 am to 10 pm and have the hours of operation posted at the front entrance to the building
Step 3 – Erect the Proper Signage
Dealers must have a permanent sign at their business location that meets the following requirements:
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- Contain the name of the business known to the public
- All letters must be at least six inches in height
- Able to withstand reasonable weather conditions
- Vehicle auction dealers must display two additional 2 x 6 ft. signs that read “Attention Buyers: Vehicles sold at this auction may not have had a safety inspection.”
Step 4 – Register with the Secretary of State
All businesses seeking to operate in Missouri must be registered with the office of the Missouri Secretary of State. To register, dealers can call (573) 751-3827 or register online here.
Step 5 – Complete Dealer Education Program
Used vehicle dealers applying for the first time must complete a state approved dealer education program. Dealers can register for the program here. Wholesale dealers are not required to complete the dealer education program.
Step 6 – Obtain a Franchise Agreement (if applicable)
Franchise dealers must obtain a written statement from the franchisor stating that they have permission to sell new vehicles.
Step 7 – Purchase Insurance
All dealers are required to purchase and maintain garage liability insurance on all vehicles with dealer plates.
Step 8 – Pass Inspection
All dealers must pass an inspection of their business location by an authorized law enforcement officer or designee (see Step 2 for requirements).
Step 9 – Complete the Application
Missouri requires all dealer license applications to be submitted online through their licensing portal located here.
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- 9.a Business Photograph – Dealers must submit a photograph of their business location including all display space and signage as part of their application
- 9.b Background Check – All dealer applicants must obtain a background check and submit it with their application. Dealers can obtain a background check here.
- 9.c Financial Responsibility – A signature or certificate of financial responsibility is required for all dealer applicants. This document ensures that the dealer will maintain liability insurance on all motor vehicles that the dealer owns or is licensed.
- 9.d Dealer Plates – Dealers can request the number of dealer plates they wish to receive when submitting their application. The dealer plate guidelines are:
- Up to three starting plates
- 1 additional plate for every 10 sales (different for RV dealers)
- 350 plate limit for manufacturers
- Salvage dealers can purchase 1 additional vehicle plate for every 50 vehicles sold between July 31st of the previous year and June 1st of the current year
Step 10 – Pay Fees
All dealer licensing fees must be paid online when submitting the dealer application. Missouri’s dealer license application fee structure is as follows:
10.a Application and Renewal Fees
| Month of Application | Dealer / Manufacturer | Boat Dealer / Manufacturer |
|---|---|---|
| January | $150 | $80 |
| February | $137.50 | $73.33 |
| March | $125 | $66.67 |
| April | $112.50 | $60 |
| May | $100 | $53.30 |
| June | $87.50 | $46.67 |
| July | $75 | $40 |
| August | $62.50 | $33.33 |
| September | $50 | $26.67 |
| October | $37.50 | $20 |
| November | $25 | $13.33 |
| December | $12.50 | $6.67 |
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- $350 registration fee when applying for both a dealer and an auction license simultaneously
- $12 fee for a replacement license
- $8.50 fee for any dealer system record print
- $1.50 fee per year for each copy of the dealer license
- $25 late fee for renewal applications submitted between October 31st and January 1st
- $50 late fee for renewal applications submitted after December 31st
10.b Dealer Plate Fees
The initial dealer plate is $50 and must be renewed annually. The chart below shows the prorated dealer initial dealer plate fees for plates requested after January 31st:
| Month of Application | Initial Plate Fee |
|---|---|
| January | $50 |
| February | $45.83 |
| March | $41.67 |
| April | $37.50 |
| May | $33.33 |
| June | $29.17 |
| July | $25 |
| August | $20.83 |
| September | $16.67 |
| October | $12.50 |
| November | $8.33 |
| December | $4.17 |
Additional dealer plates cost $10.50 when purchased before January 31st. The prorated fee for all additional dealer plates purchased after January 31st is as follows:
| Month of Application | Each Additional Plate |
|---|---|
| January | $10.50 |
| February | $9.63 |
| March | $8.75 |
| April | $7.88 |
| May | $7 |
| June | $6.13 |
| July | $5.25 |
| August | $4.38 |
| September | $3.50 |
| October | $2.63 |
| November | $1.75 |
| December | $0.88 |
Step 11 – Purchase and File a Surety Bond
Motor vehicle and boat dealers must purchase and file a $50,000 motor vehicle dealer bond. More on the filing process below.
How Does a Missouri Auto Dealer Renew Their License?
The Motor Vehicle Dealer License expires every year on December 31st and must be renewed before the expiration date. Dealers can renew their license online through the Missouri Licensing Portal located here. The fees outlined in Step 10 will apply when renewing the dealer license.
What Are the Insurance Requirements for the Missouri Auto Dealer License?
The State of Missouri requires all auto dealers to maintain comprehensive liability insurance on all vehicles with dealer plates to remain in compliance with licensing regulations. The State of Missouri requires all auto dealers to maintain comprehensive liability insurance on all vehicles with dealer plates to remain in compliance with licensing regulations. Dealers must also file a $50,000 motor vehicle dealer bond.
How Do Missouri Auto Dealers File Their Bond?
The $50,000 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 of entity/individual(s) buying the bond
- Physical address where the business will operate
- Surety company’s name, address and signature
- Date on which the bond will be executed
- Bond amount
Dealers can upload the completed bond form, including the power of attorney, to the Missouri Licensing Portal when they submit their license application.
What Can Dealers Do to Avoid Claims Against the Missouri Auto Dealer Bond?
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 taxes on time and in full. Dealers should consider setting aside tax obligations as they accrue.
- Do not engage in any illegal selling practices
- Do not engage in the illegal practice of curbstoning
- Register for and renew the dealer license before December 31st each year
- Adhere to the dealer license plate regulations approved by the state
- Pay the license application fees
What Other Insurance Products Can Agents Offer Dealers in Missouri?
Missouri requires dealers to obtain comprehensive liability insurance on all vehicles with dealer plates. Most reputable dealers that provide towing or service station services should also obtain garage keepers liability. 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 Missouri Auto Dealer Customers?
Missouri conveniently provides a public database to search for active motor vehicle dealers in the state. The database can be accessed on the DMV site here. 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.
