Short answer: Used car dealers in Arizona must file a $100,000 surety bond to get licensed through ADOT’s Motor Vehicle Division (MVD), but that bond doesn’t insure your business. Dealers commonly add garage liability, dealer open lot coverage for inventory, and workers’ compensation once they have employees. Zeigler Insurance is licensed in Arizona and six other states and places dealer coverage in all seven.
What does Arizona require before a used car dealer can open?
ADOT defines a used motor vehicle dealer as someone, other than a new car dealer, who sells seven or more used vehicles in a continuous 12-month period. Applications are filed online, and ADOT’s used dealer checklist includes:
- A $100,000 surety bond, with a separate original bond for each county where you have a place of business
- A current Arizona transaction privilege tax license
- A lease or deed for the location
- Photos of all four sides of the building, the entire lot, the office, a secure file cabinet, a permanently affixed sign and posted hours
- A personal history form and fingerprint card for each partner and each owner of 20% or more
- A dealer plate application
Does the $100,000 dealer bond protect my dealership?
Not directly. Under A.R.S. § 28-4362, the bond benefits people who lose money because a dealer didn’t pay prepaid title, registration or related fees or taxes, or didn’t deliver a valid, clear title. It won’t pay for a damaged lot, a customer injury or stolen inventory. Sureties also typically expect the dealer to repay any claim they pay.
ADOT’s application pages list the bond but not a garage liability policy. Landlords, floorplan lenders and auctions may still ask for proof of coverage, and Arizona’s minimum auto liability limits of $25,000 per person, $50,000 per accident and $15,000 for property damage are a floor, not a recommendation.
What insurance do Arizona used car dealers usually carry?
| Coverage | What it’s built for | Arizona example |
|---|---|---|
| Garage liability | Injury or property damage claims from dealership operations | A customer is hurt during a test drive in Mesa |
| Garagekeepers | Customers’ vehicles in your care | A customer’s car is damaged while parked at your shop |
| Dealer open lot | Physical damage to your inventory | A monsoon storm or vandals damage cars on the lot |
| Dealer plate coverage | Vehicles driven on dealer plates | An employee drives an auction purchase from Phoenix to Tucson |
| Property and business income | Your building, equipment and income after a covered loss | Storm damage closes your office for repairs |
| Workers’ compensation | Employee job injuries | A lot attendant is hurt moving a vehicle |
| Dealer E&O | Claims tied to title, odometer and truth-in-lending paperwork | A buyer alleges an odometer disclosure error |
| Cyber liability | Data breaches and related costs | Deal files with customer information are exposed |
Not sure where garage liability ends and garagekeepers begins? Read Garage Liability vs. Garagekeepers: What Car Dealers Actually Need. Coverage varies by carrier and policy; your policy language controls.
Opening your first lot? Start with Opening a Used Car Lot? 10 Coverages to Have Before Day One.
What Arizona risks should I plan for?
Arizona dealers don’t all face the same conditions. A lot in Yuma, one in Flagstaff and one in the Phoenix metro can call for different conversations about weather and security. A few questions to ask when you set up or review coverage:
- Monsoon season: If one storm hits the whole lot, how does your open lot deductible apply, and which perils are included?
- Sun and heat: Gradual paint and interior wear is generally treated as maintenance rather than a sudden loss, so ask how your policy handles it.
- After-hours security: Does your policy have conditions for key storage, lighting or fencing?
- Auction runs: Who drives your vehicles on dealer plates, and are they on your driver list?
- Growth: A new lot in another county means another bond and an update to your insurance schedule.
Can a California agency insure my Arizona dealership?
Yes. Zeigler Insurance is an independent, family-owned agency led by Dirk and Beth Zeigler and has served clients since 2005. From our Brentwood, California office, we work with Arizona dealers by phone and email. We’re licensed in and place dealer coverage in AZ, CA, NC, NV, TN, TX and UT. Dirk Zeigler, CLCS, is a Commercial Lines Coverage Specialist and U.S. Navy veteran. See our used car dealership insurance page for more on each coverage.
Frequently asked questions
How much is the Arizona used car dealer bond?
The required amount is $100,000 for a used motor vehicle dealer under Arizona Administrative Code R17-5-402. Wholesale dealers and brokers have a $25,000 requirement. What you pay for the bond is a premium set by the surety, not the full bond amount.
Do I need another bond for a second lot?
The rule calls for a separate bond for each application and each county where you have a place of business. Confirm your specific setup with the MVD Dealer Licensing Unit.
Do I need workers’ compensation with only one employee?
A.R.S. § 23-902 applies to employers with workers regularly employed in the business and doesn’t set a minimum employee count. Check with the Industrial Commission of Arizona or your advisor about how it applies to you.
Does open lot insurance cover hail and storm damage?
It can, but covered perils, deductibles and per-storm limits differ by policy. Review them before monsoon season rather than after a claim.
Want a second look at your Arizona dealership coverage?
Opening a new lot or renewing an existing program? Request a quote or call (925) 634-1240.
Zeigler Insurance & Financial Services, Inc. · 1300 Central Blvd, Ste B, Brentwood, CA 94513 · CA License 0H18234 · AZ License 7947333