A Primer on Arizona Auto Dealer Law
As with any other state, providing for regulation of Arizona auto dealers is intended, most importantly, to protect consumers. Those consumers buy a product that often exceeds their ability to pay for it in full at the time of purchase. The Arizona laws seek to balance protecting the public with the interests of the auto dealerships, which are for profit, and the manufacturers that own or control the dealers.
The Arizona laws governing auto dealerships are codified in Title 28, Chapter 10 of the Arizona Revised Statutes, with supporting administrative rules found throughout the Title, as well as in Title 44, titled "Trade and Commerce." These laws contain the requirements for licensing dealers , brokers, salespersons, wholesaler and manufacturers, and the penalties for various actions. Generally speaking, the Registrar of Contractors has enforcement jurisdiction over level 1 dealerships (those that have a physical location), lenders and lessors, along with the motor vehicle industry office. The Department of Transportation is the agency responsible for those involved only in wholesale transactions. There is also an Arizona Motor Vehicle Dealers Interagency Group (AMVDIG) composed of representatives from all the applicable agencies, who work together, as appropriate, to facilitate enforcement of the motor vehicle laws, resolve disputes regarding those laws, and gather and disseminate information.
Requirements for Arizona Auto Dealer Licenses
As mandated by the Arizona Department of Transportation Motor Vehicle Division ("MVD"), every Arizona auto dealer must be licensed to conduct auto sales in the state. While each state has its own licensing requirements, MVD issues both new and used dealer licenses as provided under Arizona Revised Statutes ("A.R.S.") § 28-4301 through 28-4310. Applicants must be a corporation or a person (either a sole proprietorship, partnership, or member of a corporation) and are required to submit an application to the MVD, which must include the following:
- (4) A statement of whether the applicant has previously held a license issued under this chapter, and if so, the numbers and specifics of any license suspension, revocation or denial of an application for a license in this or any other jurisdiction.
- (5) A statement of the types of vehicles to be sold and the locations of the applicant’s proposed sales office.
- (6) The names and addresses of all persons with a 20 percent or more ownership interest in the applicant, including any trustee of a trust that has 20 percent or more beneficial interest in the applicant, and if the applicant is a partnership, limited liability company or limited liability partnership, the names and addresses of all general and limited partners, members or interest holders in the applicant.
- (7) A notarized statement of anticipated monthly sales volume.
- (8) A notarized statement from the lessor, owner or authorized person to sign the statement for the landlord, that the applicant’s main place of business complies with all municipal, county, state and federal building, zoning and other laws, and that the applicant in the operation of the business will not be conducting any illegal activity.
- (9) A notarized statement that the applicant authorizes officers of the department, city or county to inspect the applicant’s business premises during regular business hours.
- (10) A statement as to the officers of the applicant.
- (11) Proof that the applicant is bonded in compliance with § 28-4307, if the applicant does not have a permanent highway address for business operations (including storage yards for vehicle inventory).
- (12) A notarized statement regarding whether an officer of the applicant has been served with notice of the seizure of vehicles under chapter 31, article 5.2, the disposition of that seizure and whether that officer has submitted 26 a written request to the department for reinstatement of the dealer’s license.
- (13) Proof that the applicant meets the requirements pursuant to section 41-1080 to obtain a fingerprint clearance card from the department of public safety.
- (14) Proof that the applicant has completed training required by the department of transportation and that the applicant has knowledge of state laws and rules relating to motor vehicle buyers and sellers and a business plan to implement policies and procedures to comply with the law.
- (15) Any other information the department prescribes by rule.
Once the application and all required material has been submitted, the applicant and any person who owns twenty percent or more of the ownership interest in the business must then appear at a Department interview. All applicants seeking to renew an existing dealer license must also meet the above requirements, except for the proof that the applicant is bonded in compliance with § 28-4307 if the applicant does not have a permanent highway address for business operations.
Arizona Auto Dealer Mandatory Compliance Requirements
Arizona auto dealers must comply with a comprehensive federal and state regulatory framework governing sales practices and advertising. Only through training can the intended statutory goals be achieved. Fair Trade Practices – Arizona Statutes (§§ 44-1521 et seq.) purport to protect consumers from unfair trade practices generally (e.g. misrepresentations made and tacitly accepted in an industry). Particularly relevant to automotive retailers is the prohibition against "bait and switch" advertising and misleading customers as to the actual availability of goods, parts and services. Advertising – All advertising must include the following language: "All vehicles subject to prior sale." The language must be not less than one-quarter inch in height, distinctly printed and situated in immediate conjunction with the vehicle price. New Vehicle Sales Contracts – While dealers often delegate to manufacturers or affiliated entities the task of preparing contracts for sale and lease customer transactions, dealers are nonetheless responsible for ensuring that contracts: (i) properly comply with state and federal law; and (ii) accurately reflect the dealer’s agreement with the customer.
Responsibilities of the Arizona Department of Transportation
As the regulatory body tasked with overseeing all motor vehicle-related matters in Arizona, the Arizona Department of Transportation (ADOT) plays a critical role in regulating the conduct of auto dealers. Within the ADOT further external and internal divisions exist to ensure all obligations are met.
The legislature has made the Motor Vehicle Division ("MVD") of the ADOT responsible for regulating the activities of dealers. The MVD is divided into several sections, including the Dealer Licensing office and the Dealer Investigation Unit ("DIU").
Once a person obtains an Arizona driver’s license, they can proceed with obtaining a license through a separate process. The requirements differ for those that already possess a license and those that do not. New dealers are required to provide a certificate of approval from the Department of Public Safety and the original, signed Acceptable Business Practices certification. Existing dealers renew their dealer license every two years. Both new and current dealers must submit a new DLR-200 application at time of renewal or when requested by the DIU.
The MVD regulates three types of dealers: While there are many different types of dealers, there are only four types of licenses. The DIU is a unit within the Dealer License and Compliance Section of the MVD and is responsible for dealer investigations and ensuring dealer compliance with Arizona law. The DIU may conduct both scheduled and nonscheduled investigations of dealerships, as well as field audits of persons who may be acting as a dealer but who have not obtained a license. Failure to comply with a cease and desist order issued by the DIU, after allegedly trading as a dealer without a license, is a class 2 misdemeanor.
Consequences for Arizona Auto Dealer Non-Compliance
Failure to comply with state laws can result in a wide range of penalties designed to encourage dealers to follow the rules and regulations. In general, penalties fall into one of three categories: disciplinary "action," civil fines, and restitution. Examples of violation and the categories they fall under are: (b) Make or cause to be made any false or misleading statement or representation of any material fact in connection with any information required to be reported to any department, board or commission. (Disciplinary action) (e) Fail or refuse to appear before a committee, agency, board or commission after being directed in writing to do so by the director or other authorized person . (Disciplinary action) (g) Fail, on demand, to produce and permit the inspection and copying of any books and records during business hours. (Civil fines) (l) Fail to make required payments. (Restitution) However, it should be noted that if the dealer has a past history of violating statutes, rules, regulations, or orders relative to vehicle dealer matters or has failed to comply with or remedy violations cited in a timely manner, this puts them in the primary category of being viewed as "aggravating" factors with respect to any present or future violations. A dealer who violates the laws, rules and regulations governing the industry in Arizona does so at its peril.
Legislative Updates and Changes in Arizona Auto Dealer Law
Legislation updates, if any, in Arizona that may impact on current and new Arizona auto dealers: There have not been any recent changes to the Arizona auto dealer laws nor any proposed changes or pending legislation as of the date of the preparation of this article. Typically, the legislature does not meet to make any changes to the statutes that impact current auto dealers, other than those to the motor vehicle code, or propose new legislation during a non-session year.
Helpful Resources for Arizona Car Dealers
Ensuring compliance with Arizona’s laws and regulations requires staying informed about the latest updates and developments for auto dealers in the state and the industry as a whole. There are several resources available to auto dealers in Arizona for achieving this objective. Below is a description of some of the resources available for auto dealers in Arizona:
The Arizona Automobile Dealers Association (AADA) is the trade and lobbying association for all franchised automobile dealerships in Arizona and is involved in every major issue that affects the industry, including lobbying on legal and legislative issues and industry statistics and data. The AADA has a list of resources for auto dealers on their website.
There are several trade groups available to assist Arizona auto dealers, including the Arizona Independent Automotive Dealers Association, the Arizona Independent Auto Dealers Association, and the Arizona Independent Automotive Trade Group for Used Cars. These organizations publish regular newsletters and updates and provide regular seminars to ensure that their members stay well informed.
There are several trade publications that provide Arizona auto dealers with timely news updates for keeping informed about the auto industry , such as Automotive News, NADA, the Dealer Magazine, and the Print Dealer Magazine. The AADA also publishes a daily electronic newsletter, which contains up-to-the-minute and late-breaking industry news and information.
The National Legal Resource center – Dealer Legal Desk, produced by the National Auto Dealer Association, provides auto dealers with timely information on legal issues affecting their business. The center offers a legal disclosure date, hot topics message board, subscription service, and an online dealer compliance workshop. The Online auto dealer, the newsletter of the National Auto Dealers Association, also publishes timely updates on legal issues affecting auto dealers.
The Otto Store, LLC, for a monthly subscription fee, will manage an auto dealer’s compliance with the Dealer Law, provide updates to help the auto dealer understand how legal developments may impact their business, and provide access to other vendors who can directly assist with compliance.