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Before opening an auto dealership in Arkansas, you must obtain an auto dealer license bond, which must be renewed annually in order to maintain your license to do business. Auto dealer bonds protect both the state and the public by ensuring that auto dealers operate in accordance with the laws of the state of Arkansas.
Bond Penalty Amount: $25,000 (used) – $50,000 (new)
Bond Term: 1 year
Bond Expiration Date: Varies
Who Needs Them?
Arkansas State Police, Department of Motor Vehicles, states that any person wanting to sell 5 or more vehicles in a 12-month calendar year must apply for a dealer’s license.
Retailers selling new and/or used vehicles directly to consumers must obtain an auto dealer license bond. So must wholesalers that buy and sell cars and other vehicles through auto auctions.
There are three types of licenses that require the $25,000 surety bond:
Used Motor Vehicle Dealer’s License
Auto Auction License
How Do They Work?
As the obligee in the surety bond contract, the state sets the required bond amount—$50,000 for dealers selling new vehicles and $25,000 for dealers selling used vehicles. That is the maximum amount, or full penal amount, that will be paid out to claimants. Dealers who violate state law, for example by defrauding customers, may have a claim filed against their bond by the state or by individual consumers.
The surety company will evaluate any claim against the bond to determine its validity and will pay all valid claims on behalf of the auto dealer, the principal in the surety bond contract. However, the financial responsibility of making good on claims belongs to the bond principal—so, ultimately, the dealer must reimburse the surety company.
What Do They Cost?
To obtain an Arkansas auto dealer bond, the dealer pays a small percentage of the required bond amount. The exact percentage, known as the premium rate, is determined by the surety company based primarily on the dealer’s personal credit score.
You can expect to pay anywhere between .5% to 5% of the bond penalty amount if you maintain good credit. For individuals with lower credit ratings, we can still offer the most competitive premiums with financing sometimes being an option.