What is an Arkansas Auto Dealer Bond?
In many states, licensed auto dealers must post a surety bond as part of their ongoing licensing requirements. An Arkansas auto dealer bond meets this requirement for dealers operating an in-person or online dealership in the state. Arkansas, like other jurisdictions, makes an auto dealer bond mandatory because the bond helps protect customers against illegal or fraudulent business practices.
When an Arkansas auto dealer bond is in place, it creates a contract between three parties. The surety company provides the bond as a form of extended credit to the principal who is required to purchase the bond. The obligee, which is the Arkansas State Police, requires a bond to be posted. When a customer makes a claim against a bond for financial losses after working with the dealership, the surety company pays the claim. However, the auto dealer is then responsible for repaying the claim.
What Does an Arkansas Auto Dealer Bond Cost?
The cost of an Arkansas auto dealer bond depends on the amount of the bond requirement as well as other financial factors. Used auto dealers in the state must post a bond of $25,000, while new vehicle dealers require a $50,000 bond. In either case, though, auto dealers only pay a percentage of the total, typically between 1 and 10% of the bond requirement.
In addition to the bond amount necessary to meet licensing requirements, the price of an Arkansas auto dealer bond is based on the personal credit history of the applicant. Dealers with a high credit score are a lower risk to the surety company providing the bond, while those with bad credit may be a higher risk. Arkansas auto dealer bond prices are a higher percentage for dealers with a low credit score.
How Do I Get an Arkansas Auto Dealer Bond?
You submit a brief application online to get an Arkansas auto dealer bond. After reviewing your credit history and business information, the surety company will provide a quote for your bond and instructions on completing the process.