How to Get a Texas Dealer License
If you’re thinking of launching your own auto dealership in Texas, you need to undergo a set of administrative steps to ensure your legal compliance. The main ones are obtaining your dealer license and a Texas auto dealer bond.
Similarly to many other states, getting a dealer license in Texas entails meeting all license requirements. The licensing process itself is a rigorous one, so it is a good idea to get to know all the details in advance. Here is a thorough overview of what you need to take care of to get licensed.
#1 Know which Texas dealer license type you need
To get your licensing started, you need to select the type of dealer license that you would like to obtain from the Texas Department of Motor Vehicles. It will depend on the vehicles you want to sell.
The two main types of auto dealers in Texas are franchise dealers and independent dealers. Franchise means you will be dealing with new vehicles, while independent dealers sell used cars.
Here are all the license types in the state:
- Franchise new motor vehicle dealer
- Independent dealer
- New motor vehicle converter
- Motor vehicle lease facilitator
- Motor vehicle lessor
- Salvage vehicle agent
Within the Independent dealer category, there is a range of licenses that you can choose from:
- Independent motor vehicle – used 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 only with other licensed dealers
- Wholesale motor vehicle auction – only with other licensed dealers
- Independent mobility motor vehicle dealer license – new mobility vehicles
#2 Understand your Texas dealer license requirements
Depending on the license type you need to obtain, you are likely to have different license requirements. The TxDMV Dealer Manual is an excellent resource to get a complete overview on the process.
What is common for all licenses is that applicants need to obtain a General Distinguishing Number (GDN), which is, in essence, a Texas used car dealer license. In case you want to sell new vehicles, you will also have to apply for a franchise dealer license as well.
When applying for a GDN, you can select one of the Independent license types outlined in the previous section. To be able to sell more than one type of used vehicles, you will need to apply for each type separately.
The requirements for getting a GDN include:
- Business entity documents – business name, location and ownership information
- Proof of identity
- Completed Texas dealer license application
- $25,000 surety bond for motor vehicle, motorcycle, wholesale motor vehicle auction and mobility vehicle dealers
- Payment of Texas dealer license fees – $700 GDN fee, $90 for each dealer license plate
In case you want to sell new vehicles, you also need to complete a Franchise New Motor Vehicle Dealer License Application. The requirements are similar to the ones when applying for a GDN and can be seen in the application form.
#3 Get your Texas auto dealer bond
For most independent dealers in Texas, one of the major requirements for getting licensed is to post a $25,000 Texas auto dealer bond. The surety bond works as a safety net for your customers. Instead of protecting your business like insurance does, it safeguards the interests of the general public and the state.
To get bonded, you need to cover a small percentage of the $25,000 bond amount you are required to obtain. This is called your bond premium. For standard bonding market applicants, the percentage is usually in the range of 1%-3%. This means you might have to pay only $250 for your bond.
Your bond price is determined on the basis of your personal and business finances. Your surety agency examines your personal credit score, business financials, professional experience and assets and liquidity. If these factors are seen as solid, you can expect to pay less for your bond. You can check our surety bond cost page to understand better what determines the price of your bond.
You can start your licensing process today by getting to know your exact cost for your Texas auto dealer bond. You can apply online for a free exact quote with no obligations.
For any questions you might have, you can reach us at 877.514.5146. Lance Surety Bonds’ experts will be happy to assist you with your bonding application or overall process.