How to Get a Texas Dealer License

Published: Nov 13, 2020

Texas Dealer License

Are you thinking of launching an auto dealership in Texas? To start this new business endeavor, you need to obtain a Texas dealer license. 

The licensing process is rigorous. It entails meeting a list of requirements set by state authorities that ensure your legal compliance. 

Here is a thorough overview of how to become a car dealer in Texas.

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1. Find out the right auto dealer license type 

Your first step is to select the type of Texas auto dealer license that you would like to obtain. 

The two main license types are franchise dealers and independent dealers. The former is necessary if you want to sell new vehicles. The latter is essentially the Texas used car dealer license. 

Within the independent dealer category for used vehicles, there is a range of licenses that you can choose from:

  • Independent Motor Vehicle – used cars, trucks, motor homes, and neighborhood vehicles
  • Independent Motorcycle – used motorcycles, scooters, and ATVs
  • Travel Trailer – used trailers
  • Trailer/Semitrailer – new or used utility trailers and/or semitrailers
  • Wholesale Dealers – sell or exchange vehicles only with other licensed dealers
  • Independent Mobility Motor Vehicle Dealer – new mobility vehicles

2. Get to know the Texas dealer license requirements

The Texas Department of Motor Vehicles (DMV) is the licensing authority in the state. Getting a dealer license in Texas means that you have to meet all of its requirements. 

To obtain any of the independent dealer licenses for selling used vehicles, you have to get a general distinguishing number (GDN). If you want to sell new vehicles as well, you also need a franchise license. 

The set of documents that you have to provide for all license types includes: 

  • Business entity documents – business name and location, 
  • Business owners information
  • Copy of the IDs of all owners and general partners
  • Proof of lease or ownership of your business location
  • 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) 
  • Franchise agreement (for franchise dealers only) 

For further details about the license requirements and the procedure, you can consult the DMV’s Motor Vehicle Dealer Manual.3. Prepare your paperwork

You have to fill in the relevant application form for your license type. 

Besides that, you have to get the following paperwork from other institutions:

  • Business entity registration from the Texas Secretary of State
  • Employer Identification Number (EIN) from the IRS (if your entity is a partnership, corporation, limited liability company, or limited partnership) 

4. Obtain the necessary Texas auto dealer bond 

Most types of dealers in Texas have to get a surety bond to get licensed. 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 Texas auto dealer bond requirements ensure a safety net for your customers. Instead of protecting your business as insurance does, the bond safeguards their interests.

The required amount of the Texas auto dealer bond is $25,000

To get a dealer surety bond, 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, you can expect rates in the range of 1% to 3%.

Do you want to find out the exact cost of your auto dealer bond? Fill in the short form below! 

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5. Apply with your full document set

You need to complete the Texas dealer license application form through the DMV’s eLicensing platform. You have to attach all the required documents there.

If you need more than one license type, you need to submit separate applications for each of them. 

The relevant fees that you have to cover include: 

  • $700 Texas dealer license cost per each independent license
  • $350 franchise dealer license fee
  • $90 fee per dealer plate

6. Renew your license

You have to renew your dealer license every two years.

To prolong your licensing, you have to apply for renewal no later than 45 days before the license expiration date. You need to renew your bond as well. 

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.

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Victor Lance is the founder and president of Lance Surety Bond Associates, Inc. He began his career as an officer in the U.S. Marine Corps, serving two combat tours. As president of Lance Surety, he now focuses on educating and assisting small businesses throughout the country with various license and bond requirements. Victor graduated from Villanova University with a degree in Business Administration and holds a Masters in Business Administration (MBA) from the University of Michigan's Ross School of Business.

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