Arkansas Auto Dealer Bond

An Arkansas auto dealer bond, formally called a Motor Vehicle Dealer Bond, is a surety bond required before certain dealer licenses can be issued. New vehicle dealers are licensed through the Arkansas Motor Vehicle Commission, while used motor vehicle dealers, wholesalers, and auto auctions are licensed through the Arkansas State Police Used Motor Vehicle Dealer Section.

It is a financial guarantee that your dealership will operate in compliance with Arkansas law and deal honestly with customers. If you fail to do so, an aggrieved customer or party may pursue a claim against your bond to recover qualifying losses.

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: Arkansas Motor Vehicle Commission or Arkansas State Police

The state authority that requires the bond as a condition of licensing. They set the bond amount and terms.

• 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 Arkansas. You’ll receive an email copy of the bond, and you can request a paper copy if necessary.

4. File your bond with the Auto Industry Division 

Submit your bond as part of your dealer license application. New vehicle dealers file with the Arkansas Motor Vehicle Commission. Used vehicle dealers, wholesalers, and auto auctions file with the Arkansas State Police Used Motor Vehicle Dealer Section.

Filing address for new vehicle dealers:

Arkansas Motor Vehicle Commission

900 W. Capitol Avenue, Suite 400

Little Rock, AR 72201-3826

Filing address for used vehicle dealers:

Arkansas State Police

Used Motor Vehicle Dealer Section

1 State Police Plaza Drive

Little Rock, AR 72209

Arkansas requires the following dealer license types to post a surety bond before receiving or maintaining a license.

• New motor vehicle dealers: Dealers selling new automobiles, trucks, or recreational vehicles must file a $50,000 bond with the Arkansas Motor Vehicle Commission.
• New motorcycle, ATV, scooter, utility vehicle, low-speed vehicle, and lessor dealers: These license types must file a $25,000 bond with the Arkansas Motor Vehicle Commission.
• New dealer branch locations: Each branch license application must be accompanied by its own $25,000 bond.
• Used motor vehicle dealers: Used vehicle dealers must carry a corporate surety bond of at least $25,000, filed with the Arkansas State Police.
• Wholesalers and auto auctions: Arkansas used motor vehicle dealer law covers wholesalers and auto auctions, and they must meet the applicable used dealer bond requirement.
• Used dealers with multiple licensed locations: An applicant for used dealer licenses at multiple locations may provide a $100,000 bond covering all licensed locations instead of separate $25,000 bonds for each individual location.

The bond protects consumers and other aggrieved parties from financial loss caused by dealer violations. Bond proceeds are paid only after a judgment from an Arkansas court against the dealer and in favor of the aggrieved party or the State of Arkansas.

A claim can be filed for violations including:

• Selling or soliciting the sale of a motor vehicle without a dealer license
• Committing a fraudulent act in selling, purchasing, or otherwise dealing in motor vehicles
• Failing to endorse and deliver an assignment and warranty of title to the buyer
• Failing to deliver a certificate of title or manufacturer's certificate of origin within a reasonable period of time
• Disconnecting, turning back, or resetting a vehicle's odometer

Coverage differs slightly between the two bonds. The used motor vehicle dealer bond protects a retail buyer and covers their loss plus reasonable attorney's fees, and Arkansas law caps the surety's liability at $25,000 even where a $100,000 multiple-location bond has been filed. The new motor vehicle dealer bond protects any person who suffers a loss from an act that is grounds for suspension or revocation of the dealer's license, and does not separately name attorney's fees.

For either bond, the surety's total liability to all claimants cannot exceed the bond amount, no matter how many years the bond has been in force. After any payout, you as the principal are liable to reimburse the surety.

How the Claims Process Works?

• Consumer or aggrieved party pursues the claim and obtains a final judgment from an Arkansas court, where required
• The surety reviews the claim and supporting judgment to determine whether it falls under the bond
• If the claim is valid, the surety pays the claimant up to the bond’s penal sum
• The dealer is then required to reimburse the surety for any amounts paid out
• Claims on your record can significantly increase your bond premium at renewal

Your bond must remain in force for as long as you hold an Arkansas dealer license. To keep it active, you must pay the renewal premium when it is due.

Used motor vehicle dealer licenses run from January 1 through December 31 and are renewable during the month of January, unless the Arkansas State Police provides a staggered method of annual renewal by rule. If your license has expired at least 31 days but less than six months, you must pay a $35 late fee before your renewal application will be accepted. A license that is not renewed within six months of its expiration date is permanently expired, and you would need to reapply for licensure and pay all fees again.

New dealer licenses are maintained with the Arkansas Motor Vehicle Commission, which renews licenses annually and requires the bond to remain on file.

Lance Surety will contact you well in advance of your premium due date to help prevent any lapse in coverage.

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

Getting an Arkansas auto dealer license depends on whether you sell new or used vehicles. New vehicle dealers apply through the Arkansas Motor Vehicle Commission, while used motor vehicle dealers apply through the Arkansas State Police.

New dealer applicants typically need to submit the initial dealer application packet, a bona fide franchise or dealer agreement then in effect with a manufacturer or distributor, a relevant market area statement, the original bond, proof of liability insurance meeting the Motor Vehicle Safety Responsibility Act minimum, location photos, and the appropriate fees. New motor vehicle dealer applicants must also show they have adequate display space, facilities to perform repair and service work with space for new parts and accessories, and that warranty and repair services will be performed at the licensed location.

Used dealer applicants must submit the application prescribed by the Arkansas State Police, verified by oath or affirmation, along with:

• A photograph of the business location
• A corporate surety bond of at least $25,000
• Proof of liability insurance on all vehicles offered for sale, in an amount at or above the Motor Vehicle Safety Responsibility Act minimum
• A list of everyone holding an ownership interest in the dealership
• A list of salespersons to be employed
• Evidence of a bona fide established place of business used primarily for selling used motor vehicles, a business telephone listed in the name of the business, a sign legible from the street, and a locking filing cabinet or repository for business records
• The name, address, and telephone number of the person designated to receive legal process
• An affidavit from a department officer confirming the facility was inspected within 30 days before issuance or renewal of the license

Two requirements catch applicants off guard. First, both new applicants and renewing licensees must establish that they sold at least five used motor vehicles during the previous calendar year. Second, the license fee is $250 per year, plus $125 for each additional location. Dealers licensed continuously at the same facility for ten years or more only need the inspection affidavit every other year.

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

How long does it take to get an Arkansas 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. If the Arkansas licensing authority requires a paper original, we can mail it to you.

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

The bond amount, also called the penal sum, is the maximum protection available to claimants. In Arkansas, common dealer bond amounts are $25,000, $50,000, and $100,000, depending on the license type and number of locations. This is not what you pay. The bond premium is the annual cost you pay to purchase the bond, usually a percentage of the bond amount.

What happens if my bond lapses?

If your bond lapses, you are no longer meeting Arkansas dealer licensing requirements and may not be able to operate legally. The licensing authority can suspend, deny, or refuse renewal of your license until an active bond is filed.

Can my bond be cancelled?

Yes, a surety bond can be cancelled either by you or by the surety company, and Arkansas dealer bond forms require advance written notice before cancellation takes effect. The exact notice period is stated on your bond form, so check it before you make any changes. Because the bond is a condition of your license, you should have a replacement bond filed before the existing one is cancelled.

Do I need a bond for every salesperson I employ?

No. Arkansas dealer bond requirements apply to the dealership license and, where applicable, the licensed location. Salespersons have separate application and licensing requirements, but they do not need an individual dealer surety bond.

Do I need a separate bond for each dealership location?

It depends on the license type. Each new dealer branch license application requires its own $25,000 bond. Used motor vehicle dealers can either file separate $25,000 bonds for individual locations or a single $100,000 bond covering all licensed locations. Keep in mind that even with the $100,000 bond, Arkansas law caps the surety's liability at $25,000.