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Texas Motor Vehicle Dealer Bonds

What is a Texas Motor Vehicle Dealer Bond?

An auto dealer surety bond is a GDN (General Distinguishing Number) licensing requirement the Texas Department of Motor Vehicles requires before they can issue your dealer license. 

An auto dealer bond is a special type of insurance contract acting as a guarantee that a Texas auto dealer will follow all Texas dealership rules, requirements, and service their customers with honest business practices and ethics.

By purchasing an auto dealer bond, you're making this guarantee to the Texas DMV and your customers.

Get a Free Quote for Your Texas Auto Dealer Bond Today

Motor Vehicle Dealer Bond

$50,000 Bond

2-Year Bond

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Who Is Required To Purchase an Auto Dealer Bond In Texas?

Not every GDN dealer license is required to purchase a surety bond. The following licenses must purchase a $50,000 auto dealer bond:

  • Motor vehicle licenses
  • Motorcycle licenses
  • Mobility motor vehicle licenses
  • Wholesale licenses
  • Wholesale auction licenses

The following licenses are not required to purchase a dealer bond:

  • Franchise license
  • Travel trailer license
  • Trailer/semi trailer license

Every Texas Dealer License Is Independent

Remember, every GDN license is independent.

This means, if you have a franchise dealer license and you plan on selling used vehicles, you will have to get an Independent GDN license to sell used vehicles.

And a used vehicle license classification (Independent GDN license) requires you to purchase an auto dealer bond in the amount of $50,000.

Why is a Texas Auto Dealer Bond Required?

It's unfortunate, but there are dealerships who will purposefully harm their customers to increase profits

  • Improperly transferring a title
  • Selling vehicles with no title
  • Misrepresenting vehicle information like milage, manufacture year, or condition
  • Stealing customer deposits
  • Failing to pay the correct sales taxes to the Texas Department of Revenue

One of the jobs of the Texas DMV is to protect the Texas public. This is why they require dealers, wholesalers, motorcycle dealers to be licensed. Part of this process is purchasing an auto dealer surety bond

The surety bond is your commitment, your guarantee, that you will follow the rules and give your customers the best service.

How Much Does Texas Auto Dealer Bond Cost?

The Texas auto dealer bond requires a quoted rate from a surety. A surety is the insurance company that writes surety bonds.

The surety will determine the rate based on:

  • Primarily your personal credit
  • Business industry and experience
  • Prior bond claims if they exist

When you request your free quote above, we will work with our network of A-rated sureties and find you the lowest possible price.

Example prices from really good to average are:

Bond Amount Surety Bond Rate Price You Pay
$50,000 0.5% $250
$50,000 1% $500
$50,000 2% $1,000
$50,000 3% $1,500
$50,000 4% $2,000

But the only way to know your pricing is to request a free quote and get your pricing

Then you will be able to make the right decision for your business and goals.

How Long Does The Texas Auto Dealer Bond Last?

All Texas dealer bonds have a bond term or 2 years.

This means the bond remains active for 2 years before it will have to be renewed. 

The effective date or dealer bonds in Texas must be the first of the month and the expiration date, the last day of the previous month.

Renewing your bond is easy.

Your bond specialist will contact you 30 to 45 days in advance to make sure the renewal premium is paid on time so your bond remains active. 

Once you pay the renewal premium, you don't have to do anything else. Your bond is active and your can continue selling vehicles.

Auto Dealer Bonds And Getting Your Texas Business License/Registration

Read our blog post that will take you through the steps to get your Texas auto dealer license.

At a high level, these steps are:

  1. Decide on your license classifications or classification
  2. Determine your ownership details and identities
  3. Purchase your surety bond
  4. Get your temporary tags
  5. Fulfill all of the dealership and property requirements
  6. Complete your application

Texas uses an online application process so you can upload all the necessary paperwork.

Additional Texas Auto Dealer Bond Resources & Links

For a new license, the license cannot be approved unless the bond is in effect on the date the application is approved. The license expiration date and the bond expiration date should be the same.

An Independent (GDN) License is the basic Texas motor vehicle dealer license that permits a person to buy, sell or exchange the type of used vehicle for which the GDN license is issued. 

GDN licenses are divided into categories. When applying for license, you must select one of the independent license types on the application. You must submit a separate application for each license type if you need more than one license type. The following GDN license types require a surety bond.

Independent Motor Vehicle License

Buy, sell, or exchange any type of used cars, trucks, motor homes, and neighborhood vehicles. using dealer's temporary tags, buyer's temporary tags, and metal dealer license plates on motor vehicles only.

Independent Motorcycle License

Buy, sell, or exchange any type of used motorcycles, motor scooters or ATVs using dealer's temporary tags, buyer's temporary tags, and metal dealer license plates on motorcycles, motor scooters or ATVs only.

Wholesale Dealer License

Sell or exchange vehicles only with other licensed dealers and are not required to have a five-vehicle display area. May not sell vehicles to retail purchasers. 

Wholesale vehicle dealers may buy, sell, or exchange used vehicles, including motor vehicles, motorcycles, and travel trailers. May buy, sell, or exchange new or used trailers and/or semitrailers. 

May use temporary tags and metal dealer license plates.

Wholesale Motor Vehicle Auction License

Offer vehicles for sale by bid only to licensed dealers at an auction at a permanent location. May not make facilities or GDN available to any other person for the purpose of the sale or auction of vehicles. 

May be issued only one wholesale motor vehicle auction GDN for a particular location. 

May be issued a regular motor vehicle GDN for a location that has been issued a wholesale motor vehicle auction GDN.

Independent Mobility Motor Vehicle Dealer License

Allows a dealer to offer to sell new mobility motor vehicles. 

A "mobility motor vehicle" is a motor vehicle designed and equipped to transport a person with a disability.

Once you receive the original signed bond form from Surety Bonds Direct, submit it to the Texas Department of Motor Vehicles at the following address:

Texas Department of Motor Vehicles  
Motor Vehicle Division  
P. O. Box 2293  
Austin, TX 78768-2293

Telephone 1-888-368-4689

Texas Department of Motor Vehicles Forms

Texas Department of Motor Vehicles Dealer License Application Process