Questions about Auto Dealer Bond in Texas
What is a Texas Auto Dealer Surety 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.
How Does Texas Auto Dealer Surety Work?
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.
What Does a Texas Auto Dealer Surety Cover?
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
What Does a Texas Auto Dealer Surety Cover?
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.
How Much Does a Texas Auto Dealer Bond Cost?
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.
|Surety Bond Name||Surety bond amount||Above 700||Between 650-699||Between 600-649||Below 599|
|Texas Motor Vehicle Dealer Bond||$50,000||$375-$750||$500-$1,500||$1,250-$3,500||$2,500-$5,000|
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.
Texas Auto Dealer Surety Bond Requirements
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
How Do I Renew my Texas Auto Dealer Bond?
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.
Other Texas MVD Bond Questions
Because of the 0% loss policy, people with bad credit scores are considered high-risk applicants. So, if you have a credit score of 650 or lower, your premiums will be 3% to 10% of the bond amount.
Sometimes, though not often, the surety may require that you post collateral as an extra precaution. Other conditions which might affect your premium price in a negative way include civil judgments, tax liens and past bankruptcies.
If, however, you have an ongoing bankruptcy or late child support payments, you won’t be able to get a bond, in compliance with national regulation.
These are the main things you need to know before you apply for a Texas motor vehicle dealer bond. Start your application process today and get your quote in just minutes!
Don’t hesitate to contact us at (877) 514-5146 if you need further assistance.
There are a number of additional requirements when applying for an auto dealer license in Texas. You can use our Texas dealer licensing guide as a step-by-step reference to all licensing requirements dictated by state law.
However, be sure to always check with the Texas Department of Motor Vehicles for the most up-to-date information on license requirements.
For more information on Texas auto dealer bonds, dealer bonds in other states, and other surety bonds for a comprehensive range of businesses and industries, contact us today to discuss your specific requirements.
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What Our Clients Have To Say?
Kimberlee AblesQuick response times and turn around for issuing bonds. Great customer service and very knowledgeable. We have used Lance Surety multiple times and have never been disappointed. Highly recommend them and Collette!
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