Surety Bond Professionals is a family-owned and operated bonding agency with over 30 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all your Arizona auto dealer bond needs.
What Are They?
Arizona auto dealer bonds are surety bonds that protect consumers and the state of Arizona, specifically the Department of Transportation, against financial loss resulting from the unlawful or unethical acts of a licensed auto dealer. Purchasing an Arizona auto dealer bond is a prerequisite for obtaining a license to operate as an auto dealer anywhere within the state of Arizona. The bond obligates the auto dealer to do business in accordance with Title 28, Chapter 10 of the Arizona Revised Statutes.
Who Needs Them?
Arizona’s Department of Transportation, Dealer Licensing Unit issues several different types of dealer licenses. The most common are new dealer licenses (for selling both new and used vehicles) and used auto dealer licenses (selling used vehicles only). Anyone selling more than four new or used vehicles a year on a retail basis must obtain one of these licenses, which requires the purchase of a bond in the amount of $100,000. This is known as the bond’s “penal sum.” There must be an Arizona auto dealer bond in place at all times to avoid suspension or revocation of a dealer’s license.
Speak with a Surety Bond Professionals agent today to discuss your bonding needs.
How Do They Work?
The surety bond agreement for an Arizona auto dealer bond is a legally binding contract between three parties:
- The Arizona Department of Transportation is referred to as the “obligee.”
- The auto dealer required to purchase the bond is the “principal.”
- The bonding company underwriting and issuing the auto dealer bond is the “surety.”
Failure to abide by all of the terms of an auto dealer surety bond agreement can result in a claim against the bond. Some common infractions include:
- Non-payment of taxes, title, registration, or other fees due to the state.
- Failing to disclose to a buyer any damage or prior repairs to a vehicle.
- Not delivering a valid certificate of title to a buyer.
Any violation can result in the Department of Transportation or a vehicle buyer filing a claim for compensation in the amount of the resulting financial loss, up to the bond’s full penal sum.
Upon receipt of a claim, the surety will launch an investigation to ensure the claim’s validity before approving it for payment. The terms of the surety bond agreement make the principal solely responsible for paying claims. But the payment to the claimant will actually be made by the surety. That’s because in issuing an Arizona auto dealer bond, the surety is agreeing to extend credit to the principal, up to the bond’s full penal sum, to pay claims. The principal then repays the surety for the amount paid out to the claimant, typically in installments rather than all at once.
What Do They Cost?
The annual premium for an Arizona auto dealer bond is a small percentage of the $100,000 penal sum. What that percentage will be depends on the creditworthiness of the principal. The premium rate will reflect how much risk the surety is assuming in agreeing to extend credit to the principal by paying claims on the principal’s behalf. A principal with a high personal credit score typically will pay a premium rate in the 1% to 3% range, or as low as $1,000.
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Our surety bond professionals will get you the Arizona auto dealer bond you need at a competitive rate.