What is an Arizona Auto Dealer Bond?
In Arizona, auto dealers must hold a valid license if they sell more than four vehicles during the year. To comply with this regulation, licensed auto dealers must also have an Arizona auto dealer bond. The bond requirement is in place to protect customers when dealing with a licensed auto dealership. If illegal or fraudulent business practices cause financial harm to the customer, a claim can be made against an Arizona auto dealer bond.
Like other surety bonds, an Arizona auto dealer bond is a contract between the dealership, known as the principal, the surety company providing the bond, and the Dealer Licensing Services agency within the Arizona Department of Transportation, known as the obligee. The surety company guarantees that payment for legitimate claims will be made on behalf of the licensed auto dealer. However, claims are ultimately repaid by the dealership.
What Does an Arizona Auto Dealer Bond Cost?
The state requires an auto dealer bond of either $25,000 or $100,000 to be in place, depending on the type of auto dealer business you operate. Brokers, wholesale auto auction dealers, and wholesale motor vehicle dealers require a $25,000 bond. Any new and used motor vehicle dealers must have a $100,000 Arizona auto dealer bond.
Fortunately, the entire bond amount does not fall on your shoulders. You only pay a percentage of the bond requirement, typically ranging from 1 to 3%. The surety company providing your bond reviews your personal credit and business financials to determine the price you pay. If you have had credit issues in the past, such as court judgments or liens, you will pay a higher percentage because you are a greater risk for a bond claim.
How Do I Get an Arizona Auto Dealer Bond?
To get your Arizona auto dealer bond, you can submit a simple request form online. The surety company reviews your information and provides a fast quote for your bond, and then provides direction on any application requirements you need to submit and how to finalize the process.