Arizona Auto Dealer Bond

An Arizona auto dealer bond, formally called a Vehicle Dealer Bond (ADOT form 38-1301), is a surety bond required by the Arizona Department of Transportation Motor Vehicle Division before your dealer or related business license can be issued.

The bond is a financial guarantee tied to two specific obligations under A.R.S. § 28-4362. It protects anyone who suffers a loss because your dealership fails to pay a title, registration, or other related fee or tax that a customer paid to you, or fails to deliver a valid vehicle title certificate free and clear of prior owner interests and liens.

Unlike insurance, which protects you, a surety bond primarily protects your customers and the state. If a valid claim is paid out, you are responsible for reimbursing the surety company.

Every surety is a contract between 3 parties:

• The Obligee: Arizona Department of Transportation Motor Vehicle Division - The bond is written in favor of the state and filed with the ADOT MVD Dealer Licensing Unit, which sets the required amount, accepts the filing, and receives notice if the bond is ever cancelled. 
• The Principal: You, the dealer - You purchase the bond and are bound by its terms. If a valid claim is paid, you must reimburse the surety.
• The Surety: such as Lance Surety Bonds - We underwrite the bond and guarantee payment to claimants up to the bond amount if you default on your obligations.

1. Submit Your Bond Application

You can apply for your bond online. Just enter some basic information about yourself and your business, and you should be able to submit your application within a matter of minutes. If you have any questions, we are more than happy to assist you.

2. Get a Quote

At Lance Surety Bonds, we want to provide you with the best premium rate possible. For most applicants with a strong credit history, a quote is ready within minutes. More complex applications may take up to 24 hours.

3. Purchase Your Bond

Once you receive your quote, you can pay the bond premium, and you’re officially bonded in Arizona. We’ll send your bond directly to your email account, and you can request a mailed copy if necessary.

4. File your bond with the Auto Industry Division 

Submit your bond with Power of Attorney as part of your dealer license application through ADOT Force. Arizona no longer accepts paper dealer applications, so required documents must be submitted electronically.

Your bond must be issued on the original Vehicle Dealer Bond form prescribed by the Director, must be signed by you and by your surety's attorney-in-fact, and must carry an embossed stamp, seal, or sticker from the bond company. ADOT will not accept a handwritten bond.

The Arizona Department of Transportation requires the following dealer and related license applicants to post a surety bond before receiving a license.

•  New motor vehicle dealers - Dealers selling new motor vehicles, or used vehicles taken in trade on new vehicles, need a $100,000 bond.
•  Used motor vehicle dealers - Dealers selling seven or more used vehicles in a continuous 12-month period need a $100,000 bond.
• Public consignment auction dealers - Businesses conducting public consignment vehicle auctions need a $100,000 bond.
• Brokers - Vehicle brokers that arrange or assist with the purchase of a specific vehicle for a customer need a $25,000 bond.
•  Wholesale motor vehicle dealers - Dealers selling used vehicles only to licensed motor vehicle dealers need a $25,000 bond.
•  Wholesale motor vehicle auction dealers - Wholesale auction businesses that provide auction services only in wholesale transactions need a $25,000 bond.
• Automotive recyclers - Businesses dismantling six or more vehicles in a calendar year for parts or disposal need a $20,000 bond.

The Arizona Vehicle Dealer Bond covers two specific failures. A claim may be filed if:

• You do not pay a title, registration, or other related fee or tax that a customer paid to you
• You fail to deliver a valid vehicle title certificate, free and clear of any prior owner's interest and all liens, in conjunction with the sale of a vehicle. The only exception is a lien created by or expressly assumed in writing by the buyer.

Arizona's bond is narrower than the dealer bonds required in some other states. It is not a general guarantee against fraud, misrepresentation, or contract disputes.

The maximum payout per bond is the bond's penal sum: $100,000, $25,000, or $20,000, depending on the license type. That limit applies to all claims combined, no matter how long the bond has been in force. After any payout, you, as the principal, are liable to reimburse the surety.

How the Claims Process Works?

1. Consumer or claimant contacts the surety company directly to file a claim
2. The surety investigates the claim to determine its validity
3. If the claim is valid, the surety pays the claimant up to the bond’s penal sum
4. The dealer or related license holder is then required to reimburse the surety for any amounts paid out
5. Claims on your record can significantly increase your bond premium or make renewal harder

The Arizona Vehicle Dealer Bond has no expiration date on its face. It takes effect on the date it is executed and stays in force until it is cancelled, so you generally do not file a new bond each year. You do pay premium annually to keep it active, and you will need to file a new bond or a bond rider if you change surety companies or change your business name, ownership, or location.

If the bond is cancelled, the surety must give at least 60 days' prior written notice to the Director of the Arizona Department of Transportation, delivered to the Dealer Licensing Unit. Termination takes effect at the end of that 60-day period unless a replacement bond is filed and accepted before then. The surety remains liable for covered acts and omissions that occurred before the termination date.

Your Arizona dealer license renews separately. Under A.R.S. § 28-4405, you must submit your renewal application, evidence of your current Arizona transaction privilege tax license, and the applicable renewal fees on or before your assigned license continuation date. If you fail to pay the required fee for the coming year by that date, the fee is delinquent and a penalty equal to the fee is added.

At renewal, the surety company may review your credit and business history. Maintaining a strong credit profile can help keep your premium costs low.

Getting an Arizona auto dealer license starts with the Arizona Department of Transportation. New applicants must submit the application and required documents through ADOT Force, because paper dealer applications are no longer accepted.

Common required documents include:

•  Authorized Presence Documentation for individual or sole proprietor applicants
•  AZ MVD Now Dealership Administrator Application
• Authorization to Release Information - Statement of Personal History
• Photos of the office space, business sign, posted business hours, locked file cabinet, and all four sides of the building
• Articles of Incorporation, if applicable
• Current Transaction Privilege Tax License showing the proposed dealership address
• Dealer bond with Power of Attorney
• Letter of Intent for new car dealers only
•  Fingerprints and background information for owners who meet the ownership threshold
• Applicable filing, licensing, and background check fees

You can find the full checklist and application process on the Arizona Department of Transportation's website.

For more information on how to get the license, check our guide: Arizona auto dealer license

How long does it take to get an Arizona dealer bond?

For most applicants, bonds are issued the same day, often within minutes of completing the application. Your bond is delivered digitally by email, and a paper copy can be mailed if needed.

What is the difference between the bond amount and the bond premium?

The bond amount, also called the penal sum, is the maximum protection offered to claimants. Arizona dealer bond amounts are $100,000, $25,000, or $20,000, depending on license type. This is not what you pay. The bond premium is the annual cost you pay to purchase or maintain the bond.

What happens if my bond lapses or is cancelled?

If your bond is cancelled and no replacement bond is filed, you are no longer in compliance with Arizona dealer licensing requirements. Arizona requires at least 60 days’ written notice before cancellation, which gives you time to replace the bond and avoid licensing issues.

Can my bond be cancelled?

If your bond is cancelled and no replacement bond is filed, you are no longer in compliance with Arizona dealer licensing requirements. Because the surety must give at least 60 days' notice before cancellation takes effect, you have time to file a replacement bond and avoid a gap.

Do I need a bond for every salesperson I employ?

No. Arizona's dealer bond requirement applies to the licensed dealer or related business type, not to each individual salesperson. This is different from some states that require separate salesperson bonds.

Do I need a separate bond for each dealership location?

It depends on the county. A branch license uses the same bond as your main license, as long as the branch is in the same county and under the same ownership and business name. Arizona requires a separate original bond for each application and for each county in which you have an established place of business, so opening in a new county means filing a new bond.