Wholesale Dealer Bond Texas Overview
To get a wholesale dealer license in Texas you must apply at the state DMV. As part of your application, you will be required to post a $25,000 auto dealer bond.
Why do I need this bond?
The purpose of the bond is to guarantee your compliance with those state laws that regulate your professional conduct and obligations as a dealer.
If you violate your obligations as a wholesale dealer, causing losses to another dealer, a claim can be filed against your bond by that person. The claim is a way to secure compensation for their losses.
When a claim is filed, the surety company that has issued your bond must investigate the issue. It then determines the amount of compensation to extend to claimants, which can be as high as the full amount of the bond.
If you are new to surety bonds and want to know more about how bonds work, see our ‘What is a surety bond' guide!
See the following sections for more information about how much it costs to get bonded, what can give rise to a bond claim, and how to get your wholesale dealer bond.
If you have any bond-related questions you want to speak to us about in person, call us at 866.450.3412 anytime!
How Much Does it Cost to Get a Texas Wholesale Dealer Bond?
The cost of your bond is known as the bond premium. It is equal to a certain percentage of the full amount of your bond. The surety that issues your bond decides what premium to offer you on the basis of several factors.
Factors that determine the cost of your bond
The main factor that influences your premium is your personal credit score. Sureties consider a high score as an indicator of financial stability. For this reason, the higher your score, the lower your bond premium is.
Applicants with very good to good credit scores are typically offered a rate on their bond between .75% and 5% of their bond amount.
Applicants with moderate to bad credit scores are offered rates between 5% and 10%.
To more accurately determine your premium, your surety is likely to also want to review your:
- Personal and business financial statements
- Fixed and liquid assets
- Industry experience
To get an estimate of your bond premium, on the basis of only your credit score, see the table below!
| Texas Wholesale Dealer Bond Cost Based on Credit Score | |||||
|---|---|---|---|---|---|
|
License type |
Bond Amount |
Credit Score | |||
| Above 700 | 650-699 | 600-649 | Below 599 | ||
| Wholesale dealer | $25,000 | $188-$375 | $250-$750 | $625-$1,250 | $1,250-$1,875 |
How Do Bond Claims Occur?
Sec. 503.033 of the Texas Transportation Code states that the surety bond required of dealers in the state is conditioned on them:
- Paying any bank drafts drawn by the dealer to buy vehicles
- Transferring a good title for every car the dealer offers for sale
If the bonded wholesale dealer violates these conditions and thereby causes losses to another dealer, the latter may file a claim against the bond. The surety will then investigate the claim and determine what amount of compensation to extend to the claimant. Depending on the type and amount of losses, such compensation can be as high as the full amount of the dealer's bond.
When the surety compensates the claimant it will seek to be reimbursed by the dealer who has given rise to a claim. It is a standard condition of bond agreements that liability for claims rests with the bonded party. Because of that, dealers are advised to steer clear of any situations that may give rise to a claim.
Apply For Your Bond Here!
To apply for your Texas wholesale dealer bond, simply click on the banner below and complete the bond form. We'll then contact you to provide you with a free quote and more details about the bonding process.
If you want to know more about this or other bonds in Texas, call us at 866.450.3412!
Further Reading
