Arizona used car dealer license, bond and insurance: where to start

If you are opening or insuring a used car lot in Arizona, you need three things lined up: a dealer license from ADOT's Motor Vehicle Division, a surety bond filed with that application, and insurance that fits how the lot actually runs. Burch Insurance Group helps Arizona dealers with the bond and the insurance side, from a first lot in Phoenix or Tucson to an established independent store. A quote or a bond does not by itself let you start selling; the license comes from ADOT.

Do I need an Arizona used motor vehicle dealer license?

Arizona law defines a used motor vehicle dealer as a person, other than a new motor vehicle dealer, who is engaged in the business of selling seven or more used motor vehicles in a continuous twelve-month period (A.R.S. 28-4301). A wholesale motor vehicle dealer is a separate license type for someone who sells used vehicles only to licensed dealers. Decide which one fits your plan before you order a bond, because the license type drives the paperwork.

What does ADOT ask for with a dealer application?

ADOT's dealer licensing FAQ says an applicant submits the dealer application, the required fees and an original surety bond for the appropriate amount. Owners with a 20 percent or greater interest must complete a criminal records check using the pre-printed Dealer Licensing fingerprint cards, and a fingerprint clearance card is not accepted in its place. Dealer licenses and dealer plates renew every year.

Your location matters too. Arizona requires a permanent sign at the entrance to a dealer's established place of business, legible from at least 300 feet in daylight (A.R.S. 28-4406), and ADOT's FAQ says a banner does not count as permanent. ADOT's dealer orientation materials say a licensed dealer must sell only from the licensed place of business unless it has an Off-Premises Permit, and must keep records at that location. Check zoning with your city before you sign a lease in Phoenix, Mesa, Tucson or anywhere else.

How much is the Arizona dealer bond, and what does it cover?

Under A.R.S. 28-4362, the ADOT director sets the bond amount, and for a dealer license it may not be more than $100,000. Confirm the current amount for your license type with ADOT Dealer Licensing before you order the bond. The bond amount is the coverage limit, not what you pay; the surety prices it after reviewing the owners' credit and finances.

The statute says the bond protects anyone who suffers a loss because the dealer did not pay customer-prepaid title, registration or related fees or taxes, or did not deliver a valid title free of prior liens. The bond cannot be cancelled without at least 60 days' notice to the director. ADOT also says a branch license uses the same bond as the main license, and a change of name or location needs a bond rider.

A bond is not insurance for you. If the surety pays a valid claim, it can seek repayment from the dealer.

What insurance does an Arizona used car lot need?

Most small Arizona dealers start the conversation with these coverages:

• Garage or dealer liability for injuries and property damage from your premises and operations, including test drives
• Dealer physical damage on inventory, sometimes called open lot coverage, for cars you own while they sit on the lot or are driven by staff
• Garagekeepers coverage if you hold or repair customers' vehicles
• Property coverage for the office, shop and equipment
• Workers' compensation if you have employees

Weather is a real exposure for inventory parked outdoors. The National Weather Service office in Tucson defines the monsoon as June 15 through September 30 and notes that the strongest straight-line gusts can exceed 100 mph and that large hail is hail greater than one inch across. Ask how hail on open lot inventory is handled, what the per-vehicle and per-storm deductibles are, and whether there is a cap per location.

Take a fictional two-person lot in Glendale that carries about 25 cars worth up to $300,000 at peak. The owner tells us about test drives, who moves cars to auctions and where cars sit overnight. That lets us quote liability and open lot limits that match the real peak inventory instead of an average. This is an illustration, not a promise of a particular result.

What BIG needs to quote

Send the business name and entity, the lot address, ownership details, target opening or renewal date, your license type, expected peak inventory value, number of employees and drivers, and whether you repair vehicles or hold customer cars. If you already have a policy, send the declarations and five years of losses.

Our used-car dealer insurance quote checklist has more detail, and our Minnesota dealer page shows how the steps compare in another state.

Questions Arizona dealers ask us

Can I sell a few cars a year without a license? Arizona's definition of a used motor vehicle dealer is based on selling seven or more used vehicles in a continuous twelve-month period. If you plan to be in the business, check with ADOT before you sell.

Is the dealer bond the same as dealer insurance? No. The bond protects customers and others for title and fee problems under the statute. It does not cover injuries, lawsuits or damage to your cars.

I only sell to other dealers. Is that a different license? Yes. Arizona has a separate wholesale motor vehicle dealer license for people who sell used vehicles only to licensed dealers. Confirm the bond amount for that license with ADOT.

Do I need an agent with an Arizona office? No. Burch Insurance Group is licensed in Arizona and works with Arizona dealers by phone and online.

Get the bond and insurance started

Tell us your target date and what you know so far. We will tell you what is missing and line up the bond and coverage dates with your ADOT application.

Request a dealer insurance quote, or call 612-712-6407.