Texas Motor Vehicle Dealer Surety Bonds

If you're looking to activate your license in your state to buy, exchange, lease, display, or sell motor vehicles, you'll first need to file a dealer bond with the Texas Department of Transportation. In doing so, you ensure that the public will be compensated should there be a failure to comply with the licensing laws. If you're unfamiliar with these bonds, find out more about how they work, why they're required, and how you can get one. 

What is a Texas Motor Vehicle Dealer Bond?

A Texas motor vehicle dealer bond is essentially a way to safeguard the people of the state from the actions of a fraudulent dealer. If you don't conform to the letter of the law or step outside the code of ethics, there's a guarantee of monetary compensation for the wronged parties. In the case of fraud, it's the dealer that will need to pay the full costs of the bond, but they're not the ones required to fulfill the payment immediately. With a surety bond, the underwriter first pays the funds to the state of Texas (technically the Texas Department of Transportation) before requesting the money back from the dealer. 

Terms of the Texas Auto Dealer Bond

Your auto dealer bond must last for as long as your license does, and it applies to all dealers who work with three or more vehicles within 12 months in the state. (There is an exception for those who deal with travel trailers, trailers, or semi trailers though as a surety bond is not required for them.) 

Texas Motor Vehicle Dealer License: Application and Renewal

Applying for a motor vehicle dealer license starts with having your location inspected by a compliance manager. The application will list what's needed on their form, so you can prepare before the on-site inspection. You'll need to complete a Dealer Training School, have your fingerprints taken by the Texas Department of Law Enforcement, and provide proof of a motor vehicle dealer bond. Depending on how you operate, you may need either one or both of the following licenses:

Independent Dealers License (GDN)

GDN is short for general distinguishing number, and it's the basic license that all dealers must have in order to operate in the state. You'll have several options if you're applying for a GDN, depending on the types of vehicles you deal with and how you deal with them. If you're independently buying, selling, or trading motorhomes, mobility motor vehicles, cars, trucks, ATVs, scooters, or motorcycles, you'll need a surety bond and a GDN if you plan to use temporary tags and plates. 

Franchise Dealers License

A franchise dealers license is required for dealers who will set up more than one place of business. This license is needed in addition to GDN, so you'll need to have it before you can be approved. The rules for this can be tricky though, because dealers can use the same GDN if they're in the same city but will need a franchise dealers license if setting up their business beyond the city limits. These licenses can either cover a person or the business. 

Applying for Your Texas Motor Vehicle Dealer License

A Texas Motor Vehicle Dealer License will typically last for two years. You will receive reminder notifications in the mail as well as instructions for how to renew your license. Please note that you will need to include proof that your surety bond has also been renewed to be given a renewed license. 

What’s the Cost of a Texas Motor Vehicle Dealer Bond?

This is a common question: how much is an auto dealer bond? The amount of the surety bond is fixed at $25,000, but the amount that you pay will be based on your overall credit score. Because the license lasts about two years, you pay the bond company in two annual premiums. For dealers with excellent credit scores, it's not unusual to pay a small fraction of $25,000 (e.g., 3% or less) per year. However, those with lower credit scores may pay up to 10%, depending on their financial circumstances and history. With ACS, it's anywhere from $200 to $2,275. 

How Much Is a $25,000 Surety Bond?

The cost of a surety bond in Texas will again depend on the dealer's credit score, but the idea is that the bond company will cover up to $25,000 worth of fraud before requesting full repayment from the dealer. 

Can I Get a Dealer License Without a Dealership?

In Texas, the answer is no. You'll need some type of licensed business location to sell your vehicles. The Texas department of motor vehicles can give you more information about how they inspect your location so you know what they're looking for. 

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As a surety bond broker, we work for YOU not the surety company.  We are licensed nationwide and appointed by 25 surety companies so that we are able to offer the best solution for all surety bond needs.  We are a small organization that strives to make you feel like part of our family.   

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  • Credit below 650 and/or have blemishes on credit report.
Average cost is 5-15% of the bond amount.
  • Available for all commercial bonds.

Why does credit matter? Applying for a surety bond is similar to applying for a loan. You are asking a surety company to back you financially. Reviewing credit is the best method for the surety to understand their risk. All sureties review credit as a view only and should have no effect on your credit score. While it is true that bad credit makes it harder to obtain a competitive quote, we are committed to making sure all of our customers have access to the best possible rates. While we can’t guarantee that we can provide a bond for the most extreme bad credit situations, we strive to make sure no stone is unturned! In other words, if you are insurable, we will get it written. Contact us today and let us put together an online quote for you that will exceed your expectations.