New Mexico Auto Dealer Bond: A Comprehensive Guide
October 26th, 2020
This guide provides information for insurance agents to help new and pre-owned car dealership owners on New Mexico Auto Dealer bonds
At a Glance:
- Average Cost: 0.5% – 9% of the bond limit per year, based on the business owner’s credit.
- Bond Amount:
- $12,500 for motorcycle dealers
- $50,000 for all other dealers
- Who Needs It: All individuals or business entities who sell or deal in 4 or more motor vehicles a 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 New Mexico: The New Mexico Motor Vehicle Division (MVD)
New Mexico Statutes 66-4-1 mandates auto dealers operating in the state to obtain a motor vehicle dealer license with the MVD. The New Mexico 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 either a $12,500 or a $50,000 motor vehicle dealer surety bond to be eligible for licensure.
What is the Purpose of the New Mexico Auto Dealer Bond?
New Mexico 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 New Mexico. 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 New Mexico Auto Dealer Bond?
BondExchange makes obtaining a New Mexico 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.
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How Much Does the New Mexico Auto Dealer Bond Cost?
The $50,000 New Mexico Motor Vehicle 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.
$50,000 New Mexico Auto Dealer Bond Cost
|Credit Score*||Bond Cost (1 year)|
|660 – 748||$375|
|649 – 659||$475|
|629 – 648||$525|
|619 – 628||$750|
|600 – 618||$1,000|
|580 – 599||$2,000|
|570 – 579||$2,500|
|550 – 569||$3,500|
|500 – 549||$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 New Mexico Define “Motor Vehicle Dealer”?
New Mexico Statutes 66-1-4.4 defines a motor vehicle dealer as “any person who sells or solicits or advertises the sale of new or used motor vehicles, manufactured homes or trailers subject to registration in this state.” Exemptions to this definition include:
- Any person acting under a court order
- Public officials performing official duties
- Any person making a casual sale of a personal motor vehicle
- Lending institutions selling repossessed motor vehicles
- Licensed brokers selling pre-owned manufactured homes
How Do Auto Dealers Apply for a License in New Mexico?
Dealers in New Mexico must navigate several steps to secure their motor vehicle dealer license. Below are the general guidelines, but dealers should refer to the Dealer Instructions Packet for details on the process.
License Period – The New Mexico Dealer License expires on March 31 of each year regardless of the date of issuance and must be renewed before the expiration date
Step 1 – Determine the License Type
New Mexico 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 New Mexico Dealer License.
- Retail Dealer – Sells motor vehicles to the general public
- Wholesale Dealer – Sells motor vehicles to other licensed dealers only
- Distributor – Distributes/sells new or used motor vehicles to other licensed dealers and has an agreement with a manufacturer
- TSC – A Title Service Company prepares or submits title applications for motor vehicle dealers
- Recycler – Dismantles motor vehicles for the purpose of selling scrap material
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:
- Permanently enclosed building
- Owned or leased by the dealer and used for commercial purposes only
- Office space where records and documents are stored
- Functioning utilities and restrooms
- Displays the business hours of operation
- Display lot where motor vehicles for sale can be showcased
Step 3 – Erect a Sign
Dealers must erect a permanently affixed sign that displays the business’s name in letters at least 6 inches high and is visible from a minimum distance of 50 feet.
Step 4 – 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 their zoning approval letter with their application.
Step 5 – Purchase a Surety Bond
Dealers must purchase and maintain a surety bond in the amounts of $12,500 for motorcycle dealers or $50,000 for motor vehicle dealers.
Step 6 – Complete Dealer Training
Dealers selling used motor vehicles must complete a mandatory pre-licensing education program with the New Mexico Independent Auto Dealers Association and submit the course certificate with their application. Dealers can register for the pre-licensing course here.
Step 7 – Complete the Application
Dealers can submit both their initial and renewal applications online through the New Mexico Dealer Portal. Dealers should include the following information with their application:
- 7.a Business License – Dealers must have a New Mexico business license and submit a copy of their license with their application. New Mexico Business Licenses are issued locally, and dealer’s should contact their local county office for more information on how to obtain a license.
- 7.b Business Identification Numbers – Dealers will need to obtain the following identification numbers and list them on their application:
- 7.c Business Ownership Documents – Dealers must submit either their article of incorporation or organization with their application
- 7.d Lease – Dealers who lease their business location must submit a copy of their lease with their application. The lease must have a minimum term of 6 months.
- 7.e Franchise Agreement – Dealers selling new motor vehicles must submit a copy of their franchise agreement with a motor vehicle manufacturer authorizing them to sell each make and model of new motor vehicle
- 7.f Pictures/Diagrams – Dealers must submit the following pictures/diagrams with their application:
- Business location
- Display area
- Office building
- Inside office space
- Diagram of the property layout and office space
Step 8 – Pay Fees
Dealers must pay a $50 application fee when submitting and renewing their dealer application.
Step 9 – Pass Inspection
The MVD may elect to inspect the dealer’s business location prior to issuing the dealer license
How Do New Mexico Auto Dealers Renew Their License?
The New Mexico Dealer License expires on March 31 of each year regardless of the date of issuance and must be renewed before the expiration date. Dealers can renew their license online through the New Mexico Dealer Portal.
What Are the Insurance Requirements for the New Mexico Auto Dealer License?
The State of New Mexico does not require dealers to maintain any form of liability insurance. Dealers must file either a $12,500 or $50,000 motor vehicle dealer bond.
How Do New Mexico Auto Dealers File Their Bond?
Dealers should scan the completed bond form and upload it to the New Mexico Dealer Portal with their application.
The $12,500 and $50,000 surety bonds both require signatures from both the surety company that issues the bond and the auto dealer. The surety company should include the following information on the bond form:
- Legal name and location of entity/individual(s) buying the bond
- Bond amount
- Surety company’s name and address
- License Type
- The date on which the bond will be executed
- Date the bond is signed
How Can New Mexico 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
- 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
What Other Insurance Products Can Agents Offer Dealers in New Mexico?
New Mexico does not require dealers to obtain any form of liability insurance, however, most reputable dealers will obtain insurance anyway. 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 New Mexico Auto Dealer Customers?
New Mexico conveniently provides a public database to search for active motor vehicle dealers in the state. The database can be accessed 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.