Before you can begin work as a car dealer in Texas, you must be licensed through the Texas Department of Motor Vehicles. SuretyBonds.com has developed this quick and easy guide on how to become a licensed motor vehicle dealer so you can get started today.
Do I need a motor vehicle dealer license in Texas?
If you are planning on buying, selling, or exchanging cars or otherwise engaging in business as a dealer — directly or indirectly, including by consignment — you will need to apply for and receive a general distinguishing number (GDN) license from the Department of Motor Vehicles. A GDN is a basic dealer license that will allow you to buy, sell, or exchange the type of used vehicle for which the GDN is issued.
There are different types of GDNs that must be obtained to sell different types of vehicles, including auto vehicles, motorcycles, towable recreational vehicles, and more. If you are planning to sell both motor vehicles and towable recreational vehicles such as travel trailers, for example, you will need to have both of the corresponding GDNs. Unless you are a franchised dealer or trailer dealer, you will also need to be bonded.
There are certain individuals who are not required to obtain a dealer GDN. If you are selling fewer than five cars in a year that are owned and registered in your name, for example, you would not need a motor vehicle dealer license. A full list of exemptions can be found in Section 3.3 of the Texas Department of Motor Vehicles’ Motor Vehicle Dealer Manual.
How do I get a motor vehicle dealer license in Texas?
Follow these steps once you’ve made sure that your line of work requires licensure:
1. Register through eLICENSING.
As of 2017, car dealers, salvage dealers, and industry licensees operating in Texas can apply for, renew, or amend motor vehicle licenses online through eLICENSING, an online self-service hub.
2. Apply for a new license.
After you have registered in eLICENSING with an organization account and at least one user account who is referred to as the eLICENSING Administrator, locate the Apply for a New License area and click “APPLY.” On the License Types page, select Independent (GDN) License, then select the organization name used to register your dealership and click “SAVE AND NEXT.” You will then be asked to identify the individuals the Motor Vehicle Division can contact for information regarding the dealership.
3. Fill out the application details.
The first application detail you will be asked to provide is the type of General Distinguishing Number you are applying for. Section 3.2 of the Motor Vehicle Dealer Manual can help you ensure you are applying for the correct Texas GDN. If you would like more than one type of GDN, you will need to submit a separate application for each type.
4. Complete the application sections and upload the required attachments.
Additional required attachments and documents may include:
- Assumed Name Certificate: If your dealership is operating under a different entity than the one that holds the license, you must submit a copy of the Assumed Name Certificate, which is available through the county clerk’s office for sole proprietorships and general partnerships.
- Certificate of Incorporation, Limited Partnerships, etc.: If the entity applying for a license is a corporation or limited partnership, submit a copy of the certificate of formation from the Secretary of State.
- Motor Vehicle Surety Bond: See step 5 for bond requirements.
5. Obtain a $50,000 Texas auto dealer bond.
Posting a $50,000 surety bond is an important and required part of the licensing process that only franchised motor vehicle and motorcycle dealers, travel trailer dealers, and trailer/semitrailer dealers are exempt from. The surety bond must be effective for the same term as the license and always equal $50,000, being brought back up immediately in the event a claim is made and the bond is reduced.
According to the Texas Department of Motor Vehicles, applications for licensure are often delayed because of mistakes regarding the bond, including incorrect names, addresses, and term dates. Make sure your bond meets these requirements so as to not delay your application:
- The owner/principal of the dealership, as well as an authorized agent of the bonding company, signs and dates the bond.
- The bond is issued for two years, expires on the last day of a month, and runs concurrently with the license term.
- The bond is issued in the name of the applicant. Formatting examples can be found in Section 3.10 of the Texas Department of Motor Vehicles’ Motor Vehicle Dealer Manual.
- The bond includes a proper Power of Attorney from the boding company, approved language, and all physical addresses of the dealership.
Texas auto dealer bonds remain in effect until canceled, as long as they are renewed every two years with the license. The bond will be canceled automatically if it is determined that the principal has violated the terms of the bond.
6. Obtain an Employer Identification Number, complete the Ownership Information Section, and sign the application.
Before your application is complete, you will be asked to obtain an Employer Identification Number (EIN) from the Internal Revenue Service.
The Texas DMV must review the criminal history of any applicant, officer, director, partner, trustee, or other representative of the applicant or license holder. Although criminal history does not automatically disqualify an applicant from licensure, all questions must be answered truthfully. Copies of court documents and details of each offense and charge must be submitted with the application.
Once the application is complete, all information is correct, and all required attachments have been uploaded, you will e-Sign the application or upload a Certificate of Responsibility.
How much does a Texas motor vehicle dealer license cost?
There are a few costs and fees associated with becoming a licensed car dealer in Texas that can be paid online through eLICENSING:
- Surety bond: The exact costs of motor vehicle dealer bonds in Texas are subject to underwriting, but the amount you pay for your bond could be as low as $375.
- Each independent license (GDN): $700
- Dealer plates/stickers: $90
- Franchise dealer license: $350
Beyond renewing your surety bond, the costs associated with renewing your dealer license are as follows:
- GDN: $400
- Dealer plates/stickers: $90
- Franchise dealer license: $350-$1,500
How do I renew my dealer license in Texas?
After receiving your General Distinguishing Number, you will need to renew your license online through eLICENSING every two years. The renewal application and all required attachments should be submitted at least 45 days before the license expires.
A penalty of 50% of the application fee is assessed for each 30-day period the license is expired. If a renewal application is not received within 90 days of the license expiration date, you will have to submit an application for a new license.
Additional considerations for Texas motor vehicle dealers
If you intend to sell, service, or exchange new motor vehicles, motorcycles, or towable RVs, you must obtain a franchised dealer license, as well as a General Distinguishing Number. These licenses are issued to a specific person or entity for a specific showroom/location. A separate franchise license is required for each separate showroom.
Need a Surety Bond?
If you’re a Texas motor vehicle dealer in search of a surety bond, call 1 (800) 308-4358 to talk to a SuretyBonds.com surety expert or get a free, no-obligation quote.