October 13th, 2020

Alaska Auto Dealer Bond: A Comprehensive Guide

alaska auto dealer bond

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

At a Glance:

  • Average Cost: $250 – $3,500 per year, based on the business owner’s credit
  • Bond Amount:
    • $25,000 for motorcycle dealers only
      $50,000 for motor vehicle dealers
  • Who Needs It: All individuals and businesses that sell or deal in 5 or more motor vehicles in a 12 month period
  • 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 Alaska: The Alaska Department of Administration, Division of Motor Vehicles (DMV)

Background

Alaska Statutes 08.66 mandates auto dealers operating in the state to obtain a motor vehicle dealer license with the DMV. The Alaska 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 $25,000 or $50,000 motor vehicle dealer surety bond to be eligible for licensure.

What is the Purpose of the Alaska Auto Dealer Bond?

Alaska 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 and that the dealer will pay all required taxes and fees to the State of Alaska. In short, the bond is a type of insurance that protects the public if the dealer breaks licensing laws.

 

Alaska Motor Vehicle Dealer’s/Buyer’s Agent Surety Bond (Rev 08/22/16)

How Can an Insurance Agent Obtain an Alaska Auto Dealer Bond?

BondExchange makes obtaining the Alaska 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 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 Alaska Auto Dealer Bond Cost?

The $50,000 Alaska Motor Vehicle Dealer surety bond can cost anywhere between $250 to $3,500 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.


$50,000 Alaska Auto Dealer Bond Cost

Credit Score* Bond Cost (1 year)
749+ $250
660 – 748 $300
649 – 659 $375
629 – 648 $500
619 – 628 $750
600 – 618 $1,000
580 – 599 $1,500
570 – 579 $2,500
550 – 569 $3,000
500 – 549 $3,500

*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 Alaska Define “Motor Vehicle Dealer”?

Alaska Statute 08.66.350 defines a motor vehicle dealer as any “person, other than a manufacturer, who sells, leases, solicits, or arranges for the sale or lease of five or more motor vehicles in any 12 consecutive months, regardless of who owns the vehicles.” Exemptions to this definition include:

  • Any person acting under a court order
  • Public officers performing official duties
  • Any person selling a motor vehicle as an incidental aspect of their business, the sale of motor vehicles cannot be this person’s primary business function
  • A person disposing of or acquiring a motor vehicle for their own use or for the use of a family member
  • Any media organization who advertises the sale of motor vehicles but does not arrange the sale

How Do Dealers Apply for a Motor Vehicle Dealer License in Alaska?

The process for applying for a motor vehicle dealer license in Alaska is pretty complex. Below are the general guidelines, but dealers should refer to the Alaska Interested Dealer Packet for details on the process.

License Period – The Alaska dealer license expires on January 1st every two years and must be renewed before the expiration date.

Step 1 – Determine the License Type

Alaska 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 Alaska dealer license.

    • New Motor Vehicles – Sells new or used motor vehicles
    • Used Motor Vehicles – Sells used motor vehicles only
    • New Motorcycles – Sells new or used motorcycles
    • Used Motorcycles – Sells used motorcycles only

Step 2 – Establish a Location

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

    • Be a permanent office structure capable of storing all business records
    • All signs and banners must be permanently affixed
    • Comply with all relevant zoning requirements

Step 3 – Purchase a Surety Bond

Dealers must purchase and maintain a bond in the amount of $24,000 for motorcycle only dealers or $50,000 (most common) for motor vehicle dealers. While the license expires on January 1st every two years, the bond may be purchased annually or for multiple years and does not need to run concurrently with the license period.

Step 4 – Complete the Application

Dealers can access the application form here.  All new dealer regulatory license applications and dealer regulatory license renewal applications should be mailed to:

State of Alaska
Division of Motor Vehicles
1300 W Benson Blvd Ste 200
Anchorage, AK 99503

    • 4.a Pictures – Each person listed on the application must submit a passport style photo with their application that meets the following requirements:
      • Must only show the head and shoulders and clearly display the face
      • Must be of the applicant only
      • Be labeled with the applicant’s name
      • Applicants must also submit a photo of their business location
    • 4.b Dealer Plates – Dealers can submit a Dealer Plate Application with their license application. The DMV charges fees based on the dealer location as follows:

Location Fees (1st Plate) Fees (Each Additional Plate)
Bethel $198 $160
Kenai Peninsula Borough/Kodiak $188 $150
Ketchikan Gateway Borough $190 $152
Mat-Su Borough $238 $200
Municipality of Anchorage $238 $200
Unalaska $276 $238
All Other Taxable Areas $176 $138
Non-Taxable Areas $88 $50

    • 4.c Business License – Dealers must submit a copy of their LOB 42: Trade business license with their application. Dealers can obtain a business license with the Alaska Department of Commerce, Community and Economic Development; Division of Corporations, Business and Professional Licensing here.

Step 5 – Pay Fees

Dealers must pay a $50 fee for all new and renewal dealer applications due upon submission.

How Do Alaska Auto Dealers Renew Their License?

The Alaska dealer license expires on January 1st every two years and must be renewed before the expiration date. Dealers should mail their renewal application, along with all application and dealer plate renewal fees to the following address:

State of Alaska
Division of Motor Vehicles
1300 W Benson Blvd Ste 200
Anchorage, AK 99503

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

The State of Alaska does not require dealers to obtain any form of public liability or property damage insurance. Dealers must file either a $25,000 or $50,000 motor vehicle dealer bond.

How Do Alaska Auto Dealers File Their Bond?

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

State of Alaska
Division of Motor Vehicles
1300 W Benson Blvd Ste 200
Anchorage, AK 99503

Both the $50,000 and $25,000 surety bonds require 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
  • Bond amount
  • Date the bond goes into effect
  • Physical address where the business will operate and their email address
  • Surety company’s name, address, email address and signature
  • Notary signatures for both the surety company and principal

How Can Alaska 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
  • Transfer all vehicle titles when sold
  • Do not engage in any illegal selling practices

What Other Insurance Products Can Agents Offer Dealers in Alaska?

Alaska does not require dealers to obtain any form of liability insurance, however most reputable dealers will still obtain comprehensive 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 Alaska Auto Dealer Customers?

Alaska conveniently provides a public database to search for active motor vehicle dealers in the state. The database can be accessed here. Contact BondExchange for help developing a marketing piece. Agents can also leverage our print-mail relationships for discounted mailing services.

2020-10-13T17:42:47+00:00

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