October 12th, 2020

Maine Auto Dealer Bond: A Comprehensive Guide

maine auto dealer bond

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

At a Glance:

  • Average Cost: 0.6% – 5% of the bond amount per year, based on the business owner’s credit
  • Bond Amount: The required bond amount is determined by the dealer’s annual sales volume:
    • $25,000 for 0-50 vehicles sold per year
    • $50,000 for 51-100 vehicles sold per year
    • $75,000 for 101-150 vehicles sold per year
    • $100,000 for 151+ vehicles sold per year
  • Who Needs It: All individuals and businesses that sell or deal in motor vehicles
  • 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 Maine: The Maine Department of the Secretary of State, Bureau of Motor Vehicles (BMV)

Background

Maine Revised Statutes 29-A mandates auto dealers operating in the state to obtain a motor vehicle dealer license with the BMV. The Maine 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, $50,000, $75,000 or $100,000 motor vehicle dealer surety bond to be eligible for licensure.

What is the Purpose of the Maine Auto Dealer Bond?

Maine 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 Maine. In short, the bond is a type of insurance that protects the public if the dealer breaks licensing laws.

 

maine auto dealer bond

Maine Motor Vehicle Dealer Bond Form (MVD-390)

How Can an Insurance Agent Obtain a Maine Auto Dealer Bond?

BondExchange makes obtaining a Maine 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 Maine Auto Dealer Bond Cost?

The Maine Motor Vehicle Dealer surety bond can cost anywhere between 0.6% to 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 Maine Auto Dealer Bond Cost

Credit Score* Bond Cost (1 year)
699+ $150
660 – 698 $170
650 – 659 $175
629 – 649 $250
619 – 628 $325
600 – 618 $500
550 – 599 $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 Maine Define “Motor Vehicle Dealer”?

To paraphrase Maine Revised Statutes Title 10 section 1471, a motor vehicle dealer is anyone who sells, negotiates or offers the sale of motor vehicles either directly or indirectly. This definition does not apply to state departments or agencies.

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

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

License Period – All dealer licenses are valid for one year from the month of issuance and must be renewed before the expiration date.

Step 1 – Determine the License Type

Maine 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 Maine dealer license.

    • New Dealer – Sells new or used motor vehicles
    • Used Dealer – Sells used motor vehicles only
    • Loaner – Owns a body shop, transmission shop or a garage
    • Equipment Dealer – Manufacturers or sells farm, industrial or construction equipment/motor vehicles
    • Transporter – Transports motor vehicles
    • Recycler – Acquires salvage vehicles and sells the parts or modifies them for resale
    • Auction Dealer – Sells motor vehicles at an auction
    • Heavy Trailer – Sells trailers over 3,000 lbs
    • Light Trailer – Sells trailers 3,000 lbs or less
    • Motorcycle Dealer – Sells motorcycles

Step 2 – Establish a Location

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

    • Be an enclosed building owned or leased by the dealer and used solely for commercial purposes
    • Have a display lot that is at least 5,000 square feet and is either paved, graded gravel, crushed rock, or mowed grass
    • Contains an office that is at least 64 square feet and contains at least 1 desk, 2 chairs and a filing cabinet
    • Be open at least 6 hours a day five days a week between the hours of 6am-9pm
    • Store all relevant records
    • Has a storage facility that has at least 400 square feet of workable floor space

Step 3 – Erect a Sign

Dealers must erect a permanent sign at their business location that meets the following minimum requirements:

    • At least 12 square feet in surface size
    • Is visible from the entrance to the lot and is readable from a minimum distance of 200 feet
    • The sign shall only display the dealer’s business name

Step 4 – Obtain Zoning Approval

Dealers must obtain zoning approval from their local zoning official certifying that the dealer’s business location is in compliance with all zoning regulations. Dealers must also have their local zoning official sign the Ordinance Clearance Form and then submit it with their application.

Step 5 – Complete the Application

All new dealer regulatory license applications and dealer regulatory license renewal applications should be mailed to:

Bureau of Motor Vehicles
29 State House Station;
101 Hospital Street
Augusta. ME 04333-0029

    • 5.a Business Type – Dealers must provide documentation for their business type (except sole proprietors). Partnerships must submit a copy of their partnership agreement and register their partnership with the city/town of their business location. Corporations and LLCs must submit either articles of incorporation or organization. Corporations must also submit the meeting minutes when the corporate officers were elected.
    • 5.b Lease Agreement – Dealers who do not own their business location must submit a copy of their lease agreement.
    • 5.c Plot Plan – Dealers must submit a plot plan of their business location that includes all measurements
    • 5.d Sales Tax Number – All dealers must submit their sales tax number with their dealer application. Dealers can obtain a sales tax number by contacting Maine Revenue Services at (207) 622-1508.
    • 5.e FEIN – Dealers must submit their Federal Employer Identification Number to the Main BMV. Dealers can obtain an FEIN here.
    • 5.f Background Check – Dealers must submit a State Police Bureau of Identification background check for each person listed on the application. Dealers can request a background check be conducted here.

Step 6 – Pay Fees

The following fees are associated with obtaining a dealer license:

    • $50 application fee for a Motorcycle Dealer
    • $150 application fee for all other dealer licenses

Step 7 – Purchase a Surety Bond

Dealers must purchase and maintain either a $25,000, $50,000, $75,000 or $100,000 motor vehicle dealer surety bond.

Step 8 – Acquire Insurance

Dealers must have liability insurance to be eligible to receive dealer plates. The dealer’s insurance company will submit an R-1348 filing with the BMV certifying that the dealer has adequate liability coverage for all dealer plates. Most dealer plates have a $20 yearly fee. The minimum insurance limits are:

    • $100,000 per person
    • $300,000 per accident
    • $100,000 property damage per accident

Step 9 – Pass Inspection

After the dealer has submitted their application and acquired their surety bond and insurance policy a Bureau of Motor Vehicle Detective will contact the dealer to set up an inspection of their business location.

How Does a Maine Dealer Renew Their License?

All dealer licenses are valid for one year from the month of issuance and must be renewed before the expiration date. Dealers should receive a renewal packet a few weeks prior to their license expiration date and should mail the renewal application and fees (same as initial application) to the following address.

Bureau of Motor Vehicles
29 State House Station;
101 Hospital Street
Augusta. ME 04333-0029

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

The State of Maine requires auto dealers to maintain comprehensive liability insurance on all vehicles with dealer plates. Dealers must file either a $25,000, $50,000, $75,000 or $100,000 motor vehicle dealer surety bond.

How Do Maine Auto Dealers File Their Bond?

The Maine motor vehicle dealer bond requires signatures from both the surety company that issues the bond and the auto dealer. A complete bond form will include the following information:

  • Legal name of entity/individual(s) buying the bond
  • Physical address where the business will operate
  • Name, address and signature of the surety company
  • Date bond is sealed

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

Bureau of Motor Vehicles
29 State House Station;
101 Hospital Street
Augusta. ME 04333-0029

How Can Maine Auto Dealers Avoid Bond Claims?

To avoid claims on the Maine 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
  • Maintain an established place of business
  • Do not engage in any illegal selling practices

What Other Insurance Products Can Agents Offer Dealers in Maine?

Maine requires dealers to obtain 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 Maine Auto Dealer Customers?

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

2020-10-12T22:37:14+00:00

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