Arkansas Car Loan Laws

How much interest an Arkansas car loan can carry

Arkansas is one of the few states with its usury limit in the constitution. Amendment 89, adopted in 2010, splits lenders into groups. A federally insured bank, national bank or savings association with its main office in Arkansas may charge the rate allowed under federal law (12 U.S.C. §1831u, as it stood on March 1, 2009). Loans to and from government units have their own rule. Everything else, including finance companies and other non-bank lenders, falls under a flat ceiling of 17% a year.

A 17% ceiling is a limit, not a price. Buyers with good credit usually pay far less, and the APR on your retail installment contract is the figure to compare. Ark. Code §4-57-104 ties the state's usury statute to the amendment. Credit unions and banks based in other states may lend under different rules, so ask any lender which limit applies to your loan. Check the dollar cost with the car payment calculator. Payday and title loans, which the cap keeps out of the state, are covered on our sister site's Arkansas lending laws page.

The $129 handling fee and vehicle taxes

• Service and handling fee. Ark. Code §23-112-317 lets a dealer charge a fee of $0 to $129, set by the Arkansas Motor Vehicle Commission. If the dealer charges it, it must charge every retail customer the same and show it as a separate line on the buyer's order.
• Required notice. The worksheet, buyer's order and installment contract must carry a conspicuous notice that the fee is not an official fee, is not required by law and may bring the dealer a profit. Dealers must also post a sign with the amount where sales papers are signed.
• Sales tax. The general state rate is 6.5%, and local taxes may be added. You pay the tax to the Department of Finance and Administration when you register the car, whether you bought from a dealer or a private seller (Ark. Code §26-52-510).
• Trade-in and lower-priced cars. Tax is due only on the difference after a trade-in. Vehicles sold for less than $4,000 owe no state sales tax, and used vehicles from $4,000 to under $10,000 get a reduced rate.

What happens if you fall behind in Arkansas

Arkansas law does not give car buyers a right to cure, meaning a required notice and a set period to catch up before the lender acts. Once your contract says you are in default, the lender may repossess without a court order. The steps that follow come from Arkansas's version of Article 9 of the Uniform Commercial Code, in Chapter 9 of Title 4.

1. 1 Repossession. The lender may take the car if it can do so without a breach of the peace (Ark. Code §4-9-609).
2. 2 Notice before the sale. The lender must send you a notice before it sells the car (§4-9-611 and §4-9-614).
3. 3 Redemption. Until the sale, you can get the car back by paying the full balance and the lender's reasonable expenses (§4-9-623).
4. 4 The deficiency. If the sale brings less than you owe, you are usually liable for the rest (§4-9-615).

Read our guides to repossession and the balance left after a sale. If you are on active duty, federal law requires a court order before repossession when you made a payment before your service began.

Where to check a dealer or lender and complain

We found no separate Arkansas license for auto finance companies. Complaints about dealer financing and lending practices go to the Attorney General, and the Motor Vehicle Commission oversees the dealers it licenses, including the handling fee rule. Banks answer to the State Bank Department or federal regulators.

Questions people ask