The Texas Motor Vehicle Dealer Bond is a surety bond required for any individual or business who wants to operate auto dealerships in the state. The surety bond is a motor vehicle dealer licensing requirement established by the Texas Department of Motor Vehicles (DMV).
The Texas Motor Vehicle Dealer Bond functions similarly to other surety bonds in that it is an agreement between the obligee, the principal, and the surety company. The obligee is the entity that requires the bond - in this case, the Texas DMV - while the principal refers to the business or individual that needs the bond. The surety company is the business that writes and financially backs the bond; though the principal is ultimately liable for any claims paid out by the surety (more on this later).
The surety bond ensures that the principal will abide by all licensing laws and regulations associated with their trade. In the event that the principal does not, any injured individual or party may file a claim against the principal’s bond. If the claim is valid—determined by an investigation by the surety company— then the surety company will compensate the injured individual(s) up to the bond amount. The principal is financially obligated to reimburse the surety company for all claims paid out, plus additional expenses and fees incurred by the surety as a result of the claim’s investigation. Examples of acts that can result in claims may include fraudulent business practices involving financing, odometer tampering, or failure to pay for purchased warranties.
The Texas Motor Vehicle Dealer Bond is issued for a two-year period.
The Texas Department of Motor Vehicles requires any motor vehicle dealer who seeks to operate in the state to acquire a surety bond as part of the licensing process to obtain a General Distinguishing Number (GDN) License.
Generally speaking, a GDN is a dealer license that allows people to purchase, sell, or exchange the type of used vehicle for which it is issued. The following GDN categories are required to obtain a surety bond:
● Motorcycle dealers
● Mobility motor vehicle (IMMV) dealers
● Wholesale only dealers
● Wholesale motor vehicle auctions
Please note that a separate bond is required for each GDN category that a dealer applies for. Travel trailer dealers, franchised dealers, and trailer/semitrailer dealers are not required to obtain this surety bond. More information on the TX GDN License and bonding requirements can be found here.
Texas motor vehicle dealers must obtain a bond amount of $50,000. However, you only pay a smaller percentage of the bond amount, called a premium. Your premium rate is determined by several factors, including your credit score (checked via a soft inquiry so as not to harm your score), industry experience, and financial standing. That said, rates can start as low as 1-3% of the bond amount if you have excellent credit. If you have nonstandard credit, we encourage you to apply for your bond anyway. At EZ Surety Bonds, we work with a variety of sureties to find you the best quote available.
The obligee, otherwise known as the Texas Department of Motor Vehicles (DMV), is the entity that requires you to obtain a surety bond. Their contact information is as follows:
Texas Department of Transportation
Motor Vehicle Division
4000 Jackson Avenue
Austin, Texas 78731
Phone: 1-888-368-4689
Applying for your required bond is quick, easy, and free with EZ Surety Bonds. You can obtain your Texas Motor Vehicle Dealer Bond by filling out our quick online form, and one of our friendly surety experts will contact you regarding your free quote within 24 hours. Following the payment and receipt of your bond, you will want to file it with the obligee, the Texas Department of Motor Vehicles.
Our surety experts are always happy to assist. If you have questions, please contact us at bonds@southcoastsurety.com or call 1-800-361-1720.
To become licensed, TXDMV dealers must complete the following requirements:
GDN licenses are typically issued for a period of two years and can be renewed for subsequent two-year periods. For more detailed information on getting your Texas dealer license, we built a comprehensive step-by-step guide you can read here.
The Texas Motor Vehicle Dealer Bond has a bond amount of $50,000, with a premium rate determined by several factors, such as the applicant’s credit score, industry experience, and business financials. The optimal applicant may see quotes starting as low as 1% of the bond amount. Fortunately, at EZ Surety Bonds, we work with dozens of surety markets to find you the best quotes available. We encourage you to apply for your free quote, regardless of your credit score. Simply apply on our website today, and we’ll contact you regarding your quote in as little as 24 hours.
After you purchase your bond, we will mail the original document to you. Most obligees require you to file the original bond with them (usually signed by the principal) According to the Texas DMV, a copy of the bond can be uploaded to the eLicensing portal as instructed in the application process. However, every obligee has their own unique filing requirements, and these are subject to change. Always confirm the bond filing requirements with your obligee before doing anything with your bond.
You’ll know if you need a surety bond because some entity will have required you to obtain one. They must also inform you of which specific bond type you’ll need. There are thousands of bonds across the country, all of which vary by state and industry.
Visit EZSuretyBonds.com to browse hundreds of bonds by state, type, or industry.
