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.
Who is Required to Get an Arkansas Auto Dealer Bond?
Similar to many other states requiring auto dealer licensing, any person or business selling five or more motor vehicles within the calendar year is required to meet certain licensing mandates. Part of the licensing obligations for auto dealers in Arkansas is securing an auto dealer bond that helps protect the buying public. Used auto dealers, wholesale auto dealers, auction auto dealers, and franchised auto dealers must post an Arkansas auto dealer bond to comply with licensing requirements.
Arkansas Auto Dealer Bond Obligee Details
Arkansas laws grant licensing authority to the Arkansas State Police Department, making the organization the obligee of Arkansas auto dealer bonds. Any licensed auto dealer operating within the state must abide by the rules set forth by the obligee, and submit licensing forms and documentation along with surety bond information to the department. Auto dealers in Arkansas may contact the obligee at the address below:
Arkansas State Policy
One State Policy Plaza Drive
Little Rock, Arkansas 72209
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.
Renewing an Arkansas Auto Dealer Bond
An auto dealer license issued in Arkansas expires one year from the date it was issued. Auto dealers must renew their license every 12 months, and the auto dealer bond must also be renewed at the same time. The surety company providing the Arkansas auto dealer bond sends renewal information several weeks in advance to ensure licensed auto dealers remain compliant with state laws and regulations.