September 22nd, 2020

Hawaii Auto Dealer Bond: A Comprehensive Guide for Insurance Agents

hawaii auto dealer bond

This guide provides information for insurance agents to help new and pre-owned car dealers on Hawaii Auto Dealer bonds

At a Glance:

  • Average Cost: 0.6% to 5% of the bond amount per year, based on the business owner’s credit
  • Bond Amount:
    • Used Auto Dealers
      • $25,000 for dealers who sell fewer than 60 used vehicles a month
      • $100,000 for dealers who sell 60 or more used vehicles per month
    • New/Franchise Auto Dealers
      • $50,000 for dealers who sell fewer than 10 new vehicles a month
      • $200,000 for dealers who sell 10 or more new vehicles a month
    • Motorcycle/Scooter Dealers: $10,000
  • Who Needs It: All individuals seeking to sell, advertise, lease, or arrange the sale of at least 3 motor vehicles in a calendar 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 Hawaii: The Hawaii Department of Commerce and Consumer Affairs, Professional & Vocational Licensing Division, is in charge of licensure and regulation of motor vehicle dealers

Background

Hawaii Revised Statutes Chapter 437-MV Industry Licensing Act mandates auto dealers operating in the state to obtain a motor vehicle dealer license. The Hawaii legislature enacted the license and regulations to ensure that dealers engage in ethical business practices. To provide financial security for the enforcement of the license law, dealers must purchase and maintain a motor vehicle dealer surety bond in amounts between $10,000 to $200,000 dependent upon the dealer’s license type and monthly sales.

What is the Purpose of the Hawaii Auto Dealer Bond?

Hawaii 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 Hawaii. 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 Hawaii Auto Dealer Surety Bond?

BondExchange makes obtaining a Hawaii 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 Hawaii Auto Dealer Bond Cost?

Hawaii Auto Dealer surety bonds can cost anywhere between 0.6% and 5% 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 $25,000 bond requirement.


$25,000 Hawaii Auto Dealer Bond Cost

Credit Score* Bond Cost ($25,000 Bond)
699+ $150
660 – 698 $170
649 – 659 $195
630 – 648 $250
620 – 629 $325
600 – 619 $500
550 – 600 $1,000
500 – 549 $1,250

*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 Hawaii Define “Motor Vehicle Dealer”?

Hawaii Revised Statutes Chapter 437-MV Industry Licensing Act defines a motor vehicle dealer as any person or business entity who sells, advertises, leases, or arranges the sale of at least 3 motor vehicles in a calendar year. Exceptions to this definition include:

  • Anyone acting as an appointee of a court
  • Public officers performing official duties
  • An auction dealer acting under the scope of the license
  • Any institution offering the sale of repossessed or foreclosed motor vehicles
  • Any person not engaged in the business of selling motor vehicles but acquires or disposes of them for personal use
  • Consumer consultants who provide advice to consumers looking to purchase motor vehicles
  • Hawaiian Banks

How Do Dealers Apply for an Auto Dealer License in Hawaii?

The process for applying for an auto dealer license in Hawaii is pretty complex. Below are the general guidelines, but dealers should refer to the application form for details on the process.

License Period – Dealer licenses in Hawaii must be renewed by June 30th of each even numbered year, e.g. 2020, 2022, 2024.

Step 1 – Determine the License Type

Hawaii 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 Hawaii Dealer License.

    • New Vehicles, Honolulu – Dealers who sell new and used vehicles in Honolulu
    • New Vehicles, Islands – Dealers who sell new and used vehicles in islands other than Honolulu
    • Used Vehicles, Honolulu – Dealers who solely sell used vehicles, motorcycles, and scooters over 49cc in Honolulu
    • Used Vehicles, Islands – Dealers who solely sell used vehicles, motorcycles, and scooters over 49cc in islands other than Honolulu
    • Auction – Dealers who auction vehicles, same license for all islands

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 be approved by the local zoning officer, and each region of Hawaii has its own zoning requirements. Contact your local zoning office for more information.

Step 3 – Purchase a Surety Bond

Dealers must purchase and maintain a motor vehicle dealer bond. The bond amounts are determined based on the license type and monthly vehicles sold as follows:

    • Used Auto Dealers
      • $25,000 for dealers who sell fewer than 60 used vehicles a month
      • $100,000 for dealers who sell 60 or more used vehicles per month
    • New/Franchise Auto Dealers
      • $50,000 for dealers who sell fewer than 10 new vehicles a month
      • $200,000 for dealers who sell 10 or more new vehicles a month
    • Motorcycle/Scooter Dealers
      • $10,000

Step 4 – Complete the Salesperson Application

All dealer businesses are required to employ at least one licensed salesperson at all times. Dealers can obtain the salesperson application form here. The salesperson application must be submitted with the dealer application. Sole proprietors and partnerships are exempt from this requirement.

Step 5 – Complete the Dealer Application

All new dealer regulatory license applications should be mailed to:

Motor Vehicle Industry Licensing Board
DCCA, PVL Licensing Branch
P.O. Box 3469
Honolulu, HI 96801

    • 5.a Self-Inspection Report – Dealers must submit both a written and sketch style self-inspection report that contains the following items:
      • Measurements of the premises
      • Office location and neighboring streets
      • Where the restrooms and office are located
      • Where the display area is located
      • All buildings on the premise
      • Submit photographs of the:
        • Outside of building
        • Interior and exterior of restrooms
        • Office
        • Display area
        • Other businesses located on the premise
    • 5.b Rental/Lease Agreement – Dealers who do not own the property where their business is located must submit a copy of their rental/lease agreement that meets the following requirements:
      • Must last for at least one year from the date the dealer application is submitted
      • The name and address on the rental/lease agreement must match the name and address on the dealer application
    • 5.c Financial Statement – Dealers must submit a current financial statement written and signed by a licensed/certified public accountant. Individuals must submit a personal financial statement. Partnerships must submit a statement on the partnership and each general partner.
    • 5.d Sales and Service Agreement – New motor vehicle dealers must submit a signed copy of an agreement with a manufacturer or distributor authorizing them to sell new motor vehicles
    • 5.e Business Entity – Corporations, partnerships, LLCs, and LLPs must submit proof they are registered with the Hawaii Business Registration Division. Dealers can register their businesses here.
    • 5.f Customer Trust Account – Auction dealers must submit a written statement from a federally insured financial institution confirming the dealer has a customer trust account for auctions

Step 6 – Pay Fees

All fees must be paid by check and submitted as part of the dealer application. Hawaii has different fee amounts dependent on whether the dealer is applying in an even ending or odd ending year. The fee amounts are:

    • Cost if applying between July 1 of an even-numbered year and June 30 of an odd-numbered year:
      • New Vehicles, Honolulu – $1172
      • New Vehicles, Islands – $588
      • Used Vehicles, Honolulu – $684
      • Used Vehicles, Islands – $393
      • Auction – $978
    • Cost if applying between July 1 of an odd-numbered year and June 30 of an even-numbered year:
      • New Vehicles, Honolulu – $611
      • New Vehicles, Islands – $319
      • Used Vehicles, Honolulu – $367
      • Used Vehicles, Islands – $221
      • Auction – $514

How Does a Hawaii Auto Dealer Renew Their License?

Dealer licenses in Hawaii must be renewed by June 30th of each even numbered year, 2020, 2022, 2024 ect. Dealers must renew their license online. Dealers can renew their license and gather information about renewal fees for each island here.

What Are the Insurance Requirements for Hawaii Auto Dealers?

While Hawaii does not require liability insurance for motor vehicle dealers, most reputable dealer firms should seek garage liability insurance. Bonds are our only business at BondExchange, so we do not issue any form of liability insurance. Our agents often utilize brokers for this specific line of business. Dealers must also file a motor vehicle dealer bond in amounts between $10,000 to $200,000.

How Do Hawaii Auto Dealers File Their Bond?

All Hawaii motor vehicle dealer 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
  • Physical address and county where the business will operate
  • Surety company’s name, address and signature
  • Bond amount
  • Two notary signatures each for the surety and principal

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

Motor Vehicle Industry Licensing Board
DCCA, PVL Licensing Branch
P.O. Box 3469
Honolulu, HI 96801

What Can Dealers Do to Avoid Claims Against the Hawaii Auto Dealer Bond?

To avoid claims on the Hawaii 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:

  • Disclose all required information when transferring ownership of a vehicle
  • Acquire and maintain all necessary vehicle permits
  • Ensure all vehicles are properly registered
  • Do not engage, or allow representatives of the business to engage, in any acts of fraud
  • Pay sellers of vehicles promptly and in full
  • Pay all required taxes and fees

How Can Insurance Agents Prospect for Hawaii Motor Vehicle Dealer Customers?

Hawaii 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.

 

2020-09-22T18:58:07+00:00

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