Texas Auto Dealer Bond

A Texas auto dealer bond is one of the most important prerequisites for getting a dealer license in the State of Texas. It is required for vehicle dealers of all types, including used car dealers but with the exception of franchised dealers, and demonstrates a financial guarantee that the dealership is operating in compliance with all legal and ethical standards.

Also known as Texas motor vehicle dealer bonds, this type of surety protects customers from malpractice and fraud by extending credit to the dealership whereby the principal, the dealer, is required to pay out on any claims.

As of September 1st, 2021, the surety bond amount is set at $50,000, an increase on the previous $25,000.

Texas Motor Vehicle Bonds (MVD Bonds) work much like other surety bonds. They represent an agreement between three parties: an obligee (the Texas Department of Transportation), a principal (the auto dealer) and a surety (a surety company). When the bond is underwritten, the surety guarantees the obligee that the principal will fulfill their part of the agreement.

A Texas auto bond also ensures that the dealer will follow all laws and regulations regarding their business. These bonds serve as protection for customers, so they don’t fall victim to fraud or financial losses in the case of negligent or unethical practice.

If the dealer breaches the agreement, the surety must compensate the state or the customer, depending on whom the breach concerns. Texas requires all auto dealers, except for franchised dealers, to obtain a motor vehicle dealer bond in order to be licensed and continue legal operations.

Lance Surety Bonds is on hand to help you through the process, from bond quote to issuing, as well as guiding you through potential claims. Contact us today for a free quote and read on to find out more about how to obtain a bond.

Like other auto surety bonds, Texas MVD bonds cover a broad range of fraudulent, negligent, or unethical practices. These include but are not limited to.

• Failing to transfer titles correctly
• Mis-advertising or deceiving customers on vehicle condition
• Tampering with the odemeter or vehicle software
• Failing to follow through with verbal or written warranties
• Using deceptive financing methods
• Not paying state sales tax or other applicable fees
• Not reporting sales
• Not adhering to licensing conditions

Auto dealer bonds are underwritten by a surety bond company after a thorough evaluation of your business. You will need to submit company information such as size, location, and financial statements, as well as go through a background check.

Your personal credit score will also be evaluated, and that’s the most important part of the process since that’s the basis for your premiums. The final goal is for the surety to be able to assess your likelihood of triggering a claim. This is important, because sureties always assume a 0% loss ratio when underwriting bonds, so the higher the credit score, the better.

Contact Lance Surety Bonds today to discuss your requirements and a member of our team will be happy to walk you through the process.

While the bond amount for a Texas MVD bond is set at $50,000 for all dealers, this does not mean you have to pay that amount. Like all surety bonds, the costs of Texas auto dealer bond, otherwise known as your premium, will be calculated by your credit score. The higher your credit score, the lower your premium.

Typically, the bond is paid in annual premiums, however, in Texas, bonds are based on two-year terms—so you pay two annual premiums every other year.

Your premium will be estimated after you submit the above-mentioned information to the surety. If you have a clean credit history and a good personal credit score, the premiums will be in the range of 1% to 3% of the total $25,000.

The application requirements for a Texas auto dealer bond will depend on the surety you make your application through. Lance Surety is committed to removing barriers for for auto dealers in Texas, and we are able to offer:

• Lowest rates in the industry
• No collateral required
• No business or personal financials required
• Approvals for good or bad credit
• No spousal indemnity required
• US Citizenship is not a requirement

For auto dealer bonds in Texas, Lance surety will notify you in plenty of time for you to seamlessly renew your coverage. We will send you the renewal invoice, which includes your renewal premium along with the payment due date, and as long as you pay your renewal premium by the due date, your bond will be renewed by the surety for another term.

Our staff contacts all customers via US Mail, fax, email and follow up phone calls to make sure you are aware of the pending due date for payment.