Arizona Auto Dealer License Guide

Learn how to become licensed as an Arizona auto dealer, and speak with an Single Source Insurance agent today about purchasing the bond you’ll need to operate as an auto dealer in Arizona. 

What Are the Different Types of Arizona Auto Dealer Licenses?

The Arizona Department of Transportation (DOT), Motor Vehicle Division (MVD) licenses auto dealers in a number of categories: new vehicle dealers (retail or wholesale), used vehicle dealers (retail or wholesale), consignment auction dealers, wholesale dealers, wholesale auction dealers, brokers, manufacturers/distributors, and auto recyclers. If your business operates in more than one of these capacities, you’ll need to be licensed in each of them.

What Are the Steps in the Licensing Process?

Assuming that you have already established a legal business entity, you can begin working your way through the steps that will culminate in the issuance of your Arizona auto dealer license. These include:

• Securing a permanent dealership location that meets MVD requirements
• Putting up the required signage
• Requesting a fingerprint and background check
• Purchasing an Arizona auto dealer bond
• Completing the online license application and other required forms through the DOT portal
• Paying the applicable fees

An Arizona auto dealer license of any type is good for one year and must be renewed before its expiration date.

Why is an Arizona Auto Dealer Bond Required?

Arizona’s license bonding requirement is an integral part of the state’s regulatory efforts to maintain an orderly auto dealing industry and provide financial protection for the state and consumers.  Dealers selling new or used vehicles and auction dealers selling vehicles on consignment must furnish a $100,000 surety bond. The required bond amount for other license types is considerably less.

In purchasing an Arizona auto dealer bond, a dealer is guaranteeing to abide by all applicable state and federal laws and operate in a completely lawful and ethical manner. Any violation that causes the state or a consumer to experience a financial loss gives the injured party the right to seek compensation for that loss by filing a claim against the dealer’s bond.

An Arizona auto dealer bond must be renewed annually so that there is always an active bond in force. Dealers who allow their bond to expire may be subject to fines and penalties, including the loss of their dealer license.

How Are Arizona Auto Dealer Bond Claims Paid?

It’s helpful to understand the terminology used to identify the three parties to an Arizona auto dealer bond, which forms a legally binding contract among them. MVD is referred to as the bond’s “obligee,” the dealer as the “principal,” and the bond’s guarantor as the “surety.” The principal bears the full legal obligation to pay all claims the surety determines to be legitimate. In practice, however, the surety will pay a valid claim on behalf of the principal, who must then reimburse the surety. Failure to repay that debt can result in the surety taking legal action against the principal.

How Much Does an Arizona Auto Dealer Bond Cost?

The annual premium cost for an Arizona auto dealer bond is calculated by multiplying the required bond mount by the premium rate established by the surety on a case-by-case basis. The surety’s main concern is the risk of not being repaid for claims paid on the principal’s behalf. That risk is assessed based on the principal’s personal credit history.

A high personal credit score suggests that the risk to the surety is low, resulting in a low premium rate. On the other hand, a principal with a low credit score presents a greater potential risk to the surety and warrants a higher premium rate. Depending on where a given principal falls on the risk continuum, the premium rate could be anywhere from less than one percent to around ten percent.