While the steps to get your Arizona auto dealer license are easy enough to follow, the Arizona Department of Transportation has the steps spread across multiple pages. That's why this article is laid out to connect the steps so you can get your application complete and ready to submit.
Here's the steps at a high level:
- Know the type of license or licenses you're applying for
- Complete the application
- Purchase the required surety bond (auto dealer bond)
- Get the appropriate criminal background checks
- Ensure your dealership location meets all the requirements
- Get the paperwork together if you have an official business entity
- Determine if you can and will use dealer plates
Step 1: The Arizona Auto Dealer License Classifications
Arizona has seven dealer license classifications.
Let's breakdown each license classification.
New Motor Vehicle Dealer
A new dealer has franchise agreement with a manufacturer to sell a brand and or specific models of vehicle.
This type of dealer also includes the sale or exchange of any new or used vehicle taken in trade for a new or used vehicle for resale.
Used Motor Vehicle Dealer
A used vehicle dealer is required to be licensed when seven or more vehicles are sold in a continuous 12 month period. Keep in mind, continuous means any stretch of 12 months... not just a calendar year.
Used motor vehicle dealers do not include a wholesale auction dealer or public consignment auction dealer.
Wholesale Vehicle Dealer
A wholesale dealer is an individual or business entity that sells vehicles to other licensed dealers in Arizona. No retail sales to the public are allowed.
Wholesale Vehicle Auction Dealer
Similar to a wholesale dealer, this individual or business entity only works with auctioning off vehicles wholesale to licensed dealers in Arizona. This does not include direct sales to a license dealer, that would be a wholesale dealer.
Public Consignment Auction Dealer
This is a dealer who can auction off vehicles to the public. However there are a few rules a consignment auction dealer must follow:
- Auctions must be held at the established place of business or at an authorized off-premises location approved by the Department of Transportation
- Live auctions must be conducted with a licensed auctioneer who verbally calls for and accepts bids
- Auctions must be made available to the public on a consignment contract basis
A consignment contract basis means the owner of the vehicle gets an agreed upon percentage of the sold price.
Vehicle Broker
A broker is an individual or business entity that is hired by a customer to locate and purchase a specific type of vehicle.
However, a broker must not be:
- A new auto dealer or an employee or agent of a new auto dealer
- A used auto dealer or an employee or agent of a used auto dealer
- A manufacturer or employee or agent of a manufacturer
- An auctioneer or engaged in the auto auction business
- A wholesale vehicle dealer
Automotive Recycler
This would be an individual or business entity in the business of acquiring vehicles for the sole purpose of dismantling and selling the parts or accessories of the vehicle.
In order to be licensed, six or more vehicles must be purchased during a continuous 12 month period.
Step 2: Complete The Application
Make sure you thoroughly complete the application. Any incomplete section or field will cause the Arizona Department of Transportation to send back the application.
The individual or all of the partners or officers of an LLC or corporation must sign the application.
Here are the other application rules that are most important:
- Each license requires its own application and processing
- A change in business structure after becoming licensed requires a new application process (including fees and a new surety bond)
- Any license has its own dealership license number and dealer plates are only tied to one license number
Make sure before you submit your application, the correct business structure and location for your dealership are decided upon to avoid any headaches.
Step 3: Purchase Your Auto Dealer Surety Bond
If this is your first time getting licensed, the concept of a surety bond is probably new.
A surety bond is a type of insurance contract you purchase as a guarantee that you will follow all the laws and regulations as a dealer in Arizona, plus you'll conduct business with your customers using proper business conduct and ethics.
In the simplest terms, a surety bond ensures a dealership will conduct business and not deliberately cause financial harm to customers or the state of Arizona.
It's a reality of business that there will be licensed dealers who will purposefully try to take advantage of their customers or the state of Arizona to increase profits.
Examples of purposeful misconduct are:
- Transferring a title incorrectly or falsifying a title
- Selling vehicles with no title or fake titles
- Misrepresenting vehicle information like milage, manufacture year, or accident history
- Stealing from customer deposits or requiring fake deposits
- Failing to pay sales tax on vehicles to the Connecticut Department of Revenue
The Surety Bond Amount
In Arizona, the surety bond requirement for dealerships is different depending on the license classification.
Every surety bond, or auto dealer bond, has an amount determined by the Arizona Department of Transportation.
The more responsibility and interactions with the public, the higher the bond amount required. Here are the current bond amounts for each license classification.
| License Classification | Bond Amount | Get a FREEE Quote |
|---|---|---|
| New vehicle dealer | $100,000 | |
| Used vehicle dealer | ||
| Public consignment auction dealer | ||
| Wholesale vehicle dealer | $25,000 | |
| Wholesale auction dealer | ||
| Vehicle (private) broker | ||
| Automotive recycler | $20,000 |
How To Purchase an Auto Dealer Bond
The bond amount is not the price you pay. The bond amount is the maximum amount of financial coverage available if a claim were ever brought against the bond.
The cost of an Arizona dealer bond is based on a rate determined independently by a surety.
A surety is an insurance company that issues surety bonds. Each surety will use their own underwriting guidelines to assess the applicant and determine a rate.
The rate multiplied by the bond amount is the price you pay.
Here are some examples of Arizona dealer bond prices with excellent to average rates.
| Bond Amount | Surety Bond Rate | Price You Pay |
|---|---|---|
| $100,000 | 0.5% | $5000 |
| $100,000 | 1% | $1,000 |
| $100,000 | 1.5% | $1,500 |
| $100,000 | 2% | $2,000 |
| $100,000 | 2.5% | $2,500 |
| $100,000 | 3% | $3,000 |
| $100,000 | 3.5% | $3,500 |
It only takes 1 to 2 days maximum from quote request to your bond being issued. However, the Arizona Department of Transportation requires a physical copy of the bond with raised seals and your physical signature on the bond.
This means we'll have to send you the bond. Do not wait until the last second to start the surety bond process. Get your pricing today so you have it ready to submit with your application.
Learn more about the Arizona auto dealer bond and request a free quote today so you can get your exact price.
Step 4: Criminal Background Check
Either the individual (sole proprietor) or any member or official who has a 20% or more ownership stake in the business must get a criminal background check.
There is a personal history form and fingerprint card in the application packet.
If the application is for an additional license and every person on the application has completed the background check within the last 5 years, no background check is required.
Step 5: Special Paperwork Requirements
Buying a Dealership?
If you're purchasing a dealership, the buy/sell agreement must be submitted at the time of submitting the application.
New Franchise Dealership?
All new vehicle dealerships must submit the authorization letter of Certificate of Appointment signed by the agent of the manufacturer or distributor. This must include:
- The name of the dealership
- The name and make of the vehicles being sold
- The effective date of the franchise agreement
Step 6: Dealership Location Requirements
Compared to most states, Arizona makes the dealership location requirements easy to meet.
Dealership Location Requirements
The location must:
- Be a permanent established building or structure
- Be owned or have an active lease with a minimum of 6 months
- Have enough space to showcase at least 2 vehicles for sale
- Be devoted primarily to the business of the dealership
If your location shares space with another business, contact the Department of Transportation and get approval before you submit your application.
Used dealers, recyclers, and public consignment dealers can use a trailer as their office as long as the wheels are removed.
Wholesale dealers can operate their business from a residential property. It's a good idea to check with the local municipality zoning laws to ensure a business (in general) can be operated from a private residence.
Dealership Sign Requirements
- The dealerships sign must be legible from at least 300 feet away (a football field) during daylight hours
- The sign must indicate the business is clearly in the business of being an Arizona dealer
- Wholesale dealers must have a permanent sign at the entrance of their office (no size requirement)
- Wholesale auction and public consignment auction dealers must have a sign stating, "Vehicles are sold as is" and "No implied warranty"
Step 7: Dealership Business Structure
Both LLCs and corporations must submit copies of articles of incorporation filed with the Arizona Corporation Commission.
If an out-of-state business entity is applying for a license, the business entity must file their articles of incorporation as a foreign corporation with the Arizona Corporation Commission.
If the business entity has a copy of the current annual report and Certificate of Disclosure, these must be submitted with the application.
Limited liability partnerships must submit a copy of the partnership agreement that is on file with the Arizona Secretary of State's office.
Step 8: Decide On Dealership Plates
The only license classification allowed to purchase dealer plates are:
- New vehicle dealers
- Used vehicle dealers
- Wholesale dealers
The follow classifications are NOT allowed to purchase dealer plates:
- Wholesale auction dealers
- Public consignment auction dealers
- Brokers
- Recyclers
Here are the prices for dealership plates. Keep in mind, Arizona requires the dealer to pay for postage which is not included in this table.
New, Used, and Wholesale are eligible for dealer plates:
- $30 for auto dealer plate and trailer dealer plate
- $10 for motorcycle dealer plate
You have to pay for the postage to have the plates mailed out to you:
- $13 for 1 to 5 plates
- $15 for 6 to 10 plates
- $2 for every additional 5 plates
Step 9: Submit Application
Once you have all the required paperwork and the surety bond, the application will go through a short initial review to check for completeness. After the initial review the Arizona Department of Transportation may contact you if there are further requirements.
License Renewal
Arizona dealer licenses renew on a yearly basis. The dealer surety bond renews on a yearly basis from the effective date as well.
Renewing the license is easy using Arizona's MVD Now Dealer account on their website.
Renewing your surety bond is easy as well. If you purchase your bond through Surety Bonds Direct, your bond specialist will contact you 30 to 40 days in advance to make sure the renewal premium is paid.
The Arizona auto dealer bond is a continuous bond. This means the original bond you submit will stay active as long as you pay the renewal premium each year. There's no additional paperwork you're required to do.
Fees and Helpful Links
Here's a table including all the fees and variable costs associated with submitting your dealer application.
| Fee Amount | Purpose |
|---|---|
| $15.00 | Filing fee |
| $30.00 | Criminal records check fee per individual |
| $100.00 | Dealer license application fee |
| $30.00 | Dealer plate fee per plate if using dealer plates |
| $50.00 | Branch office fee paid when submitting application |
| $10.00 | Change of location fee for updating records |
| $10.00 | Change of business name fee |
Find a list of all the websites you'll need to access as a dealer from this page on Arizona's Department of Transportation website.
Purchase Your Arizona Dealer Bond From Surety Bonds Direct
I hope this article helped make the steps and requirements for getting your application completed correctly and easier to understand.
The Arizona Department of Transportation does have some very helpful resources:
Arizona Dealership Compliance Requirements
Arizona's Main Dealer Licensing Portal
Remember the Arizona dealer bond must be mailed to you. So while it only takes 1 to 2 days to get pricing and complete the purchase process, it can take a few additional days for shipping.
Do not push the bond requirement until the last second. Get your pricing as soon as you know the license classifications you're applying for. This way you'll be prepared and get your application approved the first time.
You can usually request an effective date for your bond 60 days in advance.
There is no cost to have us find the lowest price for you. Start the process by filing out our quote request form. If you prefer to speak with a someone, call a bond specialist at 1-800-608-9950.
