Arkansas Auto Dealer License Guide

Learn how to become licensed as an Arkansas 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 Arkansas. 

What Are the Different Types of Arkansas Auto Dealer Licenses?

Arkansas issues different types of dealer licenses to retailers, wholesalers, rebuilders, and reconditioners. Anyone who sells or deals in at least five used motor vehicles during the preceding 12 months is required to obtain a dealer license. The licensing process for retailers and wholesalers varies, depending on whether the applicant for licensure deals in new or used vehicles. Retailer licenses for used vehicle dealers are most common, so that is the focus of this article.

What Are the Steps in the Licensing Process?

Licenses for used vehicle retailers and wholesalers are issued by the Arkansas Department of Safety, State Police.  The application can be downloaded from the State Police website, or you can call 501-618-8600 and ask to have one mailed or faxed to you.

The application requires you to enter specific information about every party with an ownership interest in the business. So you must already have established a legal business entity and registered it with the Arkansas Secretary of State before filling out the license application. You must also have:

• Secured a permanent business location that meets all local zoning requirements.
• Obtained a sales tax ID number from the Arkansas Department of Finance and Administration.
• Purchased liability insurance covering vehicles in your inventory (with a minimum of $75,000).
• Purchased an Arkansas car dealer bond in the amount of $25,000.

The completed application, along with supporting documentation and payment of the license fee, must be mailed to the State Police. If your application is approved, your license will be mailed to you. You will then be contacted by a Used Motor Vehicle Dealer Inspector to set up a date to inspect your business premises.

Why is an Arkansas Auto Dealer Bond Required?

An Arkansas auto dealer bond serves two main purposes.

• First, it serves as a dealer’s guarantee to conduct business in compliance with all applicable laws and regulations governing dealing in motor vehicles in the state of Arkansas.
• Second, it provides a way for parties financially injured by the dealer’s unlawful or unethical actions to obtain compensation for damages.

Clearly, an Arkansas auto dealer bond plays an important role in maintaining the integrity of and public confidence in the state’s auto trading industry. Without an active bond in force at all times, a dealer’s license could be revoked.

How Are Arkansas Auto Dealer Bond Claims Paid?

Understanding how claims are paid rests on an understanding of an Arkansas auto dealer bond as a legally binding contract among:

• The Arkansas State Police – Special Services Section (known as the bond’s “obligee”),
• A dealer seeking a new or renewal license to operate (the bond’s “principal”), and
• The bond’s guarantor (the “surety”).

The legal obligation to pay valid claims belongs solely to the principal, the bond’s validity being determined by the surety. However, the surety guarantees the payment of claims and typically will pay a legitimate claim initially, to be reimbursed by the principal. If necessary, the surety may sue the principal to obtain repayment of the claim amount.

How Much Does an Arkansas Auto Dealer Bond Cost?

To purchase or renew an Arkansas auto dealer bond, you’ll pay only a small percentage of the $25,000 bond amount as the annual premium. The surety will set a premium rate that reflects an underwriting assessment of the risk that you might not readily reimburse the surety for claims paid on your behalf. That assessment will rely heavily on your personal credit history, and how responsible you have been about paying debts and managing credit in the past.

The better your credit, the lower the perceived risk to the surety, and the lower your premium rate.  With good credit, your premium rate is likely to be in the range of one percent (or even less) to three percent, for an annual premium between $250 and $750.