How to Get a Texas Dealer License
Your Guide to Getting a Texas Dealer License in 2022
- What is a Texas Dealer License?
- How do I Get a Texas Dealer License?
- What Are the Texas Dealer License Requirements?
- What Are the Steps to Getting Texas Dealer License?
- How Long Does It Take to Get a Texas Dealer License?
- How Much Does It Cost to Get a Texas Dealer License?
What is a Texas Dealer License?
A Texas auto dealer license is an important prerequisite for any business selling vehicles in the state of Texas. It is used to increase protection for consumers and other businesses and ensure that dealers operate within the law. Each licensing application is subject to rigorous
background checks and commonly includes supporting surety bonds and relevant insurances to minimize malpractice and fraud.
The licensing process entails meeting a list of requirements set by state authorities that ensure your legal compliance. Here, we look at what you need to get licensed in the state of Texas and how you can get your business up and running.
Who Needs a Texas Auto Dealer License?
If you wish to operate a car dealership or any business that buys, sells, or trades vehicles, then you will require a Texas dealer license. This includes cars, motorcycles, and trailers, with the license providing you with a unique General Distinguishing Number (GDN) that allows you to trade legally within the state.
Individuals who purchase up to 5 vehicles for personal use do not require a license, however, if the plan is to sell them at a later date, then a license will be required in order to remain compliant with state law.
This fact is true for dealers across the board, including wholesale dealerships and franchise dealerships, as well as those who buy, sell, or trade within auctions. Naturally, whatever type of business you plan to operate, it is important that you clarify exactly which type of Texas dealer license you require to ensure you receive the correct GDN.
What Are the Texas Dealer License Requirements?
While each Texas auto dealer license application will stipulate slightly different licensing requirements, there is a core set of documents that you must provide for all license types. These include:
- Business entity documents – a certificate of formation, incorporation, or registration with the Texas Secretary of State
- Assumed name certificate (DBA), if applicable
- Business owners’ information
- Copy of the IDs of all owners and general partners
- Employer Identification Number (EIN) registration from the IRS (if your entity is a partnership, corporation, limited liability company, or limited partnership)
- Proof of lease or ownership of your place of business
- Proof of compliance with local zoning requirements for your business location
- Proof of meeting the business location requirements (display area, office space, and business sign)
- A copy of your $50,000 Texas auto dealer surety bond
- Franchise agreement (for franchise dealers only)
How do I Get a Texas Dealer License?
To begin your Texas dealer license application, you will need to contact the Texas Department of Motor Vehicles (DMV). Submitting the application requires you to fulfil several licensing requirements, as well as ensuring you have all the correct documentation ready.
There are several different license types that you can apply for, and the specific licensing requirements will depend on the area your business plans to operate in. Below you can find the main steps to follow to get your license.
1. Pick your Texas Dealer License Type
Your first step is to select the type of Texas auto dealer license that you would like to obtain.
All dealer license applicants in the state must obtain a GDN license , also known as an independent license.
When applying, you must select the exact type of license that you want to get. If you wish to be able to sell multiple types of vehicles, you must submit a separate application for each type.
Licenses available under the independent license category include:
- Independent Motor Vehicle – can sell, buy or exchange used cars, trucks, motor homes, and neighborhood vehicles
- Independent Motorcycle Dealer – can sell, buy or exchange used motorcycles, scooters, and ATVs
- Travel Trailer – can sell, buy or exchange used trailers
- Trailer/Semitrailer – new or used utility trailers and/or semitrailers
- Wholesale Dealers – can sell or exchange vehicles only with other licensed dealers
- Independent Mobility Motor Vehicle Dealer – can sell new mobility vehicles
In addition, if you wish to sell new vehicles , you must apply for a franchise dealer license . For example, if you want to sell new cars, you need to get an Independent Motor Vehicles license first and then obtain a franchise dealer license.
2. Understand Your Specific Texas Dealer License Requirements
The Texas DMV is the licensing authority in the state. Getting a dealer license in Texas means that you must meet all of its requirements, and you need to understand which specific reequipments are associated with the type of license you need.
For example, as part of the application process, you will need to ensure that your dealership location complies with all the local zoning ordinances. It must also comply with the DMV’s requirements for dealership premises. A full list of the office and premises requirements is available through the DMV’s Motor Vehicle Dealer Manual . However, these rules generally do not apply to wholesale dealerships who do not require a show area or lot.
Additionally, all applicants for an independent motor vehicle GDN must take pre-licensing dealer training , and while this is a critical part of that specific license, this does not apply to applicants for other dealer license types. Subsequently, understanding exactly what you need for your business to operate in the state of Texas is an extremely important step.
3. Obtain а Texas Auto Dealer Bond
Most types of dealers in Texas must get a surety bond to get licensed. However, you don’t need to get bonded if you are a franchise dealer, or if you are an independent dealer who wants to sell travel trailers or trailers and semitrailers.
The required amount of the Texas auto dealer bond is $50,000 . To get bonded, you need to cover a small percentage of that amount. It is called your bond premium and is determined based on the strength of your personal and business finances. If they are in good shape and the credit score is healthy, you can expect rates in the range of 1% to 3% .
Once you have met all of the above requirements, you need to complete the Texas dealer license application form through the DMV’s eLicensing platform . You must attach all the required documents there. Additionally, if you need more than one license type, you need to submit separate applications for each of them. If you have any further questions about applying for a Texas dealer license, make sure to check the relevant eLicensing User Guide for your particular license type.
4. Renew your license
The Texas dealer license renewal is due every two years .
To meet the licensing deadline, you must apply for renewal no later than 45 days before the license expiration date. You need to renew your bond as well. Typically, you will receive an email in advance, notifying you of the approaching deadline.
Along with the renewal documents, you will need to pay renewal fees in the following amounts which are listed below.
Do you need further details about the Texas car dealer license and bonding requirements?
You can reach our bonding experts by calling us at 877.514.5146.
How Long Does It Take to Get a Texas Dealer License?
Receiving you Texas dealer license can take anywhere from a few weeks to a few months. Naturally, you will need to ensure your application is complete and you fulfil all of the stipulated requirements to ensure that it can be processed without issue. This should help speed up the application process as the TxDMV won’t need to request further documentation.
How Much Does It Cost to Get a Texas Dealer License?
The relevant licensing fees that you must cover include:
- $700 Texas dealer license cost per each independent license (GDN)
- $350 franchise dealer license fee
- $90 fee per dealer plate
- $400 per GDN
- $350 – $1,500 for franchise dealers (depending on sales)
- $90 for plates/stickers
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