If you want to become an auto dealer in Texas you’ll need to obtain a dealer license. The Texas Department of Motor Vehicles (TXDMV) oversees the licensing process and establishes the requirements you must meet to get your license.
In this guide, we’ll walk you through everything you need to know about getting your Texas dealer license.
Step 1: Choose dealer license type
The first step to get your Texas dealer license is to determine what type of license you need. All dealers must obtain a general distinguishing number (GDN), also called an independent dealer license.
When you apply for the license you must select one of the following categories:
- Independent Motor Vehicle: Lets dealers buy, sell, and exchange used cars, trucks, motorhomes and neighboring vehicles.
- Independent Motorcycle: Lets dealers buy, sell, or exchange motorcycles, scooters, and ATVs.
- Travel Trailer: Lets dealers buy, sell, and exchange used trailers.
- Trailer/Semitrailer: Lets dealers buy and sell new and used utility trailers and semitrailers.
- Wholesale Dealer: Lets dealers sell or exchange vehicles with other licensed dealers.
- Independent Mobility Motor Vehicle Dealer: Lets dealers sell mobility vehicles.
You can get multiple license classifications by submitting a separate application for each type.
If you want to sell new motor vehicles, you must obtain a franchise dealer license.
Step 2: Satisfy all Texas dealer requirements
Before you apply for your dealer license, you must meet the following requirements established by the Texas DMV:
Complete the dealer educational course
If you are applying for a GDN for the first time, you must complete a six hour dealer training course. The pre-licensing course costs $149 and is available online.
After you complete the course, you will receive a certificate of completion to include with your license application.
Establish your business location
You must have a permanent place of business to obtain a Texas dealer license. The building must meet all local zoning requirements and include an office for performing administrative operations.
The dealership location must also include proper signage and have a display lot with enough space to show five vehicles. The display area must have a hard surface and can not be a driveway.
Register your business
Most Texas auto dealers must register their business with the Texas Secretary of State.
Partnerships, corporations, limited liability companies (LLC), and limited liability partnerships (LLP) must provide an Employer Identification Number (EIN) obtained from the Internal Revenue Service.
You’ll need to include your Certificate of Incorporation, Articles of Organization or other document to verify the legitimacy of your business when submitting your application.
You can find a more detailed description of each dealer license requirement by visiting the Texas Motor Vehicle Dealer Manual.
Step 3: Buy a Texas auto dealer bond
Texas auto dealers must post a surety bond as part of the licensing process. Franchise dealers and independent trailer/semitrailer dealers are exempt from this requirement.
The Texas motor vehicle dealer bond provides financial protection to your customers and the State of Texas, guaranteeing that you will conduct business in accordance with all regulations.
The bond has a required amount of $50,000. Dealers only need to pay a small percentage of the required amount upfront as a premium. Premium rates for Texas auto dealer bonds typically range between 1% and 3% of the bond amount. The surety company evaluates a variety of factors when determining your premium including your credit history, industry experience, and financial standing.
It’s important to find a trustworthy surety company so that you can be confident your bond is fully covered and your customers are adequately protected.
Step 4: Submit your dealer license application
Once you’ve met the licensing requirements, you can complete your dealer license application through the Texas DMV eLicensing portal. You must attach supporting documents to verify you meet the necessary requirements. This includes:
- Business documents
- Proof of an established place of business that meets regulations
- Copy of your EIN (or social security number)
- Surety bond form
- A copy of a valid ID for every owner listed on the application
You’ll need to cover the following licensing fees when submitting your application:
- $700 license fee per each GDN
- $350 license fee for franchise dealer license
- $90 fee per dealer plate
Frequently asked questions about Texas dealer licenses
How much is a dealer’s license in Texas?
Dealers must pay $700 when applying for their initial GDN plus an extra $90 per dealer license plate.
Franchise dealers must pay $350 for their license.
How long does it take to get a Texas dealer license?
On average, it takes the State of Texas two to three weeks to process dealer license applications. You may experience delays if your application is incomplete. In this situation, the state will send you a letter asking you to correct any errors or provide missing information.
How many cars can you sell in a year without a dealers license in Texas?
Individuals are allowed to sell up to four motor vehicles without a dealer’s license in Texas.
How do you renew your Texas auto dealer license?
Texas auto dealer licenses are valid for a two year period. The Texas DMV will send you a reminder 75-90 days prior to your license’s expiration date.
To renew your dealer license, you must apply for renewal at least 45 days before the expiration date. You’ll also need to renew your surety bond at this time.
Your license renewal will incur the following fees:
- $400 fee per GDN
- $350 fee for renewing franchise dealer licenses
- $90 per dealer plate
If you fail to renew your license in time, you must pay late fees worth 50% of the application fee for each 30-day period the license stays expired. These fees cap after 90 days.
If you have not renewed your license within 90 days after the expiration, it will be revoked. You’ll then need to complete the entire licensing process again as if you are a new dealer.
How EZ Surety Bonds can help with a Texas dealer license
When you’re ready to start the dealership licensing process, EZ Surety can offer you a free online quote for your motor vehicle dealer surety bond.
We provide competitive premiums and quick turnarounds for individuals of all financial standings. Contact us to get your Texas auto dealer bond.