Texas businesses involved in buying, selling or exchanging motor vehicles or otherwise engaging in business as a dealer, directly or indirectly, including by consignment dealers, must submit application for a general distinguishing number (GDN) license issued by the Texas Department of Motor Vehicles. Go to www.txdmv.gov
A GDN is the basic dealer license that allows a person to buy, sell or exchange the type of used vehicle for which the GDN is issued.
As part of the GDN licensing requirements, motor vehicle, motorcycle, wholesale only, wholesale motor vehicle auction and independent mobility motor vehicle dealers are required to purchase and maintain a surety bond at all times. Franchised dealers, travel trailer dealers, and trailer/semitrailer dealers are exempt from the surety bond requirement.
The bond amount, or limit of liability required is $25,000 and the term of the bond corresponds with the licensing term, both of which are two years. The bond must be submitted to the Department with all new GDN applications. The bond will need to be renewed (or a new bond will need to be provided) in two-year increments while the license is active.
The Texas Motor Vehicle Dealer Bond protects buyers and other consumers from fraud or misrepresentation on the part of the car dealer. It ensures that the dealer transfers proper title to each motor vehicle sold and pays all valid bank drafts, including checks related to the sale of motor vehicles. In the event that damages are paid for a valid claim against the bond, the dealer is required to immediately bring the bond back up to $25,000.