How to Get a Dealer License in Texas in 5 Steps

Are you considering starting a car dealership in Texas? Before you host any ribbon-cutting ceremonies, let’s get familiar with some facts about the Texas Dealer License requirements and general licensing process.

For an even more detailed explanation, check out our FREE ebook guide!

1. Identify the type of license you need

If you’d like to buy, sell or exchange used motor vehicles in the state, you must obtain a General Distinguishing Number (GDN) from the Motor Vehicle Division of the Texas Department of Motor Vehicles (TxDMV). This is, in essence, your Texas used car dealer license.

Your first step is to identify the type(s) of license you need, by consulting the TxDMV list of licenses. There are several subtypes for selling different vehicles such as:

• Used motor vehicles dealer license
• Used motorcycles dealer license
• Used non-motorized travel trailers dealer license
• New or used trailers/semitrailers dealer license
• New or used mobility motor vehicles dealer license
• Wholesale dealer license
• Wholesale motor vehicle auction dealer license

If you also want to sell new cars, you have to get a franchised dealer license along with the GDN. In both cases, you should start by obtaining all the necessary documents needed for the license application.

You can find full information on all types of licenses in the Licensing section of the TxDMV Dealer Manual.

Please note: You can have more than one GDN license. However, for each one, you must submit a separate application. One GDN can be used for multiple dealerships of the same kind in the same city.

2. Complete the necessary Texas auto dealer pre-licensing training

As of 2020, Texas mandates that every new candidate seeking a motor vehicle dealer license and those applying for license renewal with less than 10 years of licensure as of September 1, 2019, must complete an online pre-licensing training program. This program needs to be sanctioned by the TxDMV and offered through a recognized trade association or an educational institution.

The training involves six hours of online instruction for new licensees and three hours for those renewing their licenses, focusing on vital regulations and statutes pertinent to Texas auto dealers. The cost of the Texas pre-licensing course is approximately $150, and it is a one-time requirement. Participants have the flexibility to progress through the course at their convenience, yet they must finish it before they can apply for a dealer license.

3. Understand which dealer licensing requirements apply to you

Licensing of Texas dealers is handled through the DMV’s eLicensing platform.

To make sure that your application will be accepted the first time you submit it, be extra careful when filling in the form itself, and when preparing the documents that accompany it. Verify that you are giving your correct phone number and address so that TxDMV can contact you successfully if needed.

The usual documents that are required along with your application are:

• Proof of an established and permanent business location (proof of lease or ownership), that is compliant with local zoning and equipped with a permanent business sign. It should have space for at least five vehicles of the type that you want to deal with.
• Certificate of Incorporation, Organization or Partnerships to prove the legality of the entity applying for a license.
• If your company is a partnership, corporation, limited liability company or limited partnership, you have to provide your Employer Identification Number (EIN), obtained from the Internal Revenue Service, on your application form.
• For most types of licenses, you need to submit a surety bond for $50,000. The bond should cover two years that matches the dates of the license duration.
• Your EIN or social security number
• A copy of the ID of every owner, office, or general partner listed in the application

For a detailed description of each requirement, please refer to the Dealer Manual mentioned in the previous section. All application and document forms are available on the Dealer Forms page.

Please note: You can still start your application even if one or more of the required items are missing and then return to submit it later on. Don’t forget to also include information on any other GDN licenses that you have.

4. Get a Texas Auto Dealer Bond

Getting a $50,000 Texas auto dealer bond is an important step. This bond is like a promise that involves three parties: your car dealership, the Texas Department of Motor Vehicles (DMV), and a trusted surety company. It shows that your business will follow the rules and makes customers trust you more. Make sure to pick a top-rated surety company to support your bond, which is really important to keep your customers safe and make your business look good.

At the same time, try to lower the cost of your bond by showing that your dealership is a safe bet. The amount you pay for the bond, called the premium, depends on how financially healthy and reliable your business is. Improving your financial records, paying off any old debts, and having good business practices can help lower this cost, usually to between 1% and 3% of the bond’s total amount. Focusing on these financial steps helps you get your bond at a better price and saves you money, making your business more financially sound and stable.

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5. Submit your application and obtain your dealer license

The licenses are issued for two years, and you need to pay the relevant application fees along with your application. The payment gets processed first. Then your application will be scanned and given a Work Item Number in order to get reviewed, and you’ll get an email notification at this stage.

When you get approval, you will get a printed version of your license by mail, so make sure you’ve provided the correct mailing address. With your dealer license issued, you’re ready to start your auto dealer business.

If you have any questions about the bonding process, give us a call at 866.450.3412 or contact us online. Our auto dealer bond experts are here to help.

How much does it cost to get a car dealer license in Texas?

The cost of applying for a GDN license is $700 plus an additional $90 for each dealer license plate. A franchise dealer license fee is $350. Sometimes there might be additional processing fees, depending on the type of license you’re applying for.

Also note that licenses are issued for a two-year term and will be required to pay renewal fees, which are $400 per GDN and range between $350-$1500 for franchise dealers.

How do you get a dealer’s license without a lot?

It’s still possible to obtain a dealer license in Texas without having a car lot. Plenty of independent dealers have large vehicle inventories, but this is not necessary for obtaining a license. For businesses that are just starting, it actually might be more cost-efficient to start without purchasing an entire lot.

In Texas, there is no lot requirement, but you must have proof that your business has a licensed location. Moreover, to become a licensed dealer, you must submit a completed application. In most cases, you must also secure a dealer surety bond.

The application process to securing a dealer’s license without a lot is not all that different. Get in touch with your local DMV to understand the requirements for the dealer license application.

Bonus: Texas Dealer License Renewal

Once issued, your dealer license is valid for 2 years. The Texas DMV will send you a renewal reminder 75-90 days prior to your license’s expiration. You’re required to submit your renewal application along with all required documentation no later than 45 days prior to your license’s expiration date.

Failing to renew your license on time will lead to late renewal fees of “50 percent of the application fee amount for each 30-day period the license is expired.” If you don’t submit your application within 90 days of its expiration, then your license is revoked and you have to start the whole application as if you are a newly started car dealer.

Please note: In order not to be rejected, your dealer license renewal application must include proof that you have also renewed your Texas auto dealer bond.

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