Texas Auto Dealer Bond

About your Texas Motor Vehicle Dealer Bond

Motor Vehicle Dealer Bonds are required by the state of Texas for any individual who wishes to buy, sell, or exchange motor vehicles. Before you can get your Motor Vehicle Dealer license, you must first get a Motor Vehicle Dealer bond, and file it with the Texas Department of Motor Vehicles.

Motor Vehicle Dealers handle valuable transactions that require a high degree of trust between the customer and dealer. This bond is a form of consumer protection against fraudulent dealers. It is a promise to the obligee that you will adhere to Texas vehicle dealer laws and regulations, and operate ethically. If you are found to be operating unlawfully or unethically, the principal is liable for the full sum of the bond ($25,000).

A Motor Vehicle Dealer bond operates like any other surety bond - it is a three-way agreement between you (the principal), your underwriter (surety), and the obligee (state of Texas).

With the exception of travel trailer or trailer/semitrailer dealers, any individual or business applying for a motor vehicle dealer license must submit proof of a motor vehicle dealer bond at the time of application. The bond must be effective for the same term as your license.

Texas Motor Vehicle Dealer License: Application and Renewal

If you plan to buy, sell, lease, display, or deal 3 or more motor vehicle within 12 months in Texas, you must apply for a Texas Dealer license. There are many licenses pertaining to the sale of motor vehicles, but the two main licenses are as follows. For a complete list of licenses, refer to the Texas Department of Motor Vehicles:

Independent Dealers License (GDN)

This is a basic dealer license. Any person wishing to buy, sell, or trade used vehicles must obtain a GDN (General Distinguishing Number). Under a GDN, there are several licenses available. Each license allows the holder to use temporary dealer tags and plates, and requires a surety bond unless otherwise stated below:

  • Independent Motor Vehicle - For the buying, selling, or trading of used cars, trucks, or motorhomes.
  • Independent Motorcycle - Includes used motorcycles, ATVs, or scooters
  • Travel Trailer - Includes used travel trailers. A motor vehicle dealer surety bond is not required for this license.
  • Trailer/Semitrailer - Includes new OR used utility and semitrailers. A motor vehicle dealer surety bond is not required for this license.
  • Wholesale Dealer - This license does not allow for retail sales of motor vehicles. A wholesale dealer may only sell and exchange vehicles with licensed dealers, and includes all aforementioned vehicles and trailers.
  • Wholesale Motor Vehicle Auction - May sell vehicles to licensed dealers by BID ONLY, and must be at a permanent auction location. An auction GDN is for the sole license holder, and may not be available to employees for sales or auctions. Only one GDN is allowed per auction location, but a regular motor vehicle GDN can be issued for the same location as well.
  • Independent Mobility Motor Vehicle Dealer License - This license includes any vehicle designed and equipped to transport persons with disabilities.
  • For more information on Independent Dealer Licenses in Texas, read here.

Franchise Dealers License

This license is required for anyone wishing to sell new vehicles, and must operate under an agreement with distributors and/or manufacturers. Franchise dealers are also required to have a General Distinguishing number. With this license, dealers are able to buy, sell, service, and exchange new motor vehicles, motorcycles, or towable RVs. Franchise dealer licenses cover either a specific person or business, but an additional license is required for each showroom. Dealers may use the same GDN for multiple showrooms, as long as they are in the same city limits. For more information on Franchise Licenses, read here.

Before your application:

Your business location must be inspected and approved by a compliance manager. Find your regional office here.

  • Refer to the Application for a License as a Motor Vehicle, Mobile Home or Recreational Vehicle Dealer for a complete list of location requirements.
  • Note: It is recommended you do not purchase or lease the proposed location until after approval.

Complete a Dealer Training School.

Each officer of your dealership must have fingerprints taken by the Texas Department of Law Enforcement

Submit proof of your Motor Vehicle Dealer Bond to the Texas DMV. Click the “Apply Now" button to begin the process now.

Applying for your Texas Motor Vehicle Dealer License:

Your Motor Vehicle Dealer Bond serves as a promise between you (the principal), the state (the obligee), and your surety, that you will adhere to state guidelines for proper motor vehicle sales. An added benefit for the the principal of a Motor Vehicle Dealer Bond is the signal to potential clients that you are trustworthy and professional. You need a Motor Vehicle Dealer Bond because it is required by the state of Texas for any Motor Vehicle Dealer License-holders.