How To Become A Car Dealer In Texas – Step by Step Guide

Car dealerships in Texas can be a lucrative business. So if you are considering becoming a car dealer in Texas,  there are a few things you must know about car dealerships in Texas.

Texas ranks as one of the best places to start your career as a car dealer due to the vast opportunities it offers. However, to become a car dealer in Texas, there are a few things you should learn about the business.

Becoming A Car Dealer In Texas

The process of becoming a certified car dealer can be a bit complicated. However, with the right information, you can make the process easier.  Below are five tips to become a car dealer in Texas the easy way.  

Identify the exact license you need as a car dealer

What kind of car dealer do you hope to become in Texas? Do you want to buy, exchange, or involve in selling used vehicles? Whichever the case, you must obtain a  General Distinguishing Number (GDN) from the Motor Vehicle Division of the Texas Department of Motor Vehicles (TxDMV). The GDN serves as your license to operate as a used car dealer in Texas. 

Different vehicles have different subtypes of licenses, and they include:

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

For those who wish to sell new cars, the franchise dealer license is a requirement. The first to begin your registration is by obtaining all the necessary license application documents. You can apply for more than one GN license provided you submit a separate application for each of them. 

Ensure you have a good understanding of what kind  of dealer licensing requirement that applies to you

Ensure you understand what applies to you and provide the right documents when packaging your application. Ensure that you register your correct phone number and contact address to ensure that TxDMV successfully contacts you should the need arise. 

Some of the documents that you need to submit along with your application include:

  • Evidence of an established business location (proof of ownership or lease agreement), which meets local zoning requirements, with a permanent business signpost. Your car stand must have enough space for five cars (the types your license will cover)
  • Certificate of Incorporation or Partnership to show that the business applying for a license is a legal entity
  • For those in a partnership company or belong to a corporation, or a limited liability company, the registration process requires an Employer Identification Number from the Internal Revenue Service to be written on the application form
  • Most types of licenses will require a surety bond amounting to $25,000. The bond is usually for two years, covering the dates of the license duration
  • A copy of Identity Cards of the owners or partners and office that enumerated in the application

You can visit the car dealer form page for detail of the requirements. Applying for a GDN license costs $700 with an additional $90 per dealer license plate.

Research Your Bonding Option

For most types of car dealer license in Texas, a $25000 auto dealer bond is mandatory.  However, there are certain exemptions to this requirement. They include:

  • Franchise dealers
  • Travel dealers
  • Trailer /semitrailer dealers
  1. Find more Efficient Ways to Save on Your Auto Dealer Bond

Getting a surety bond can be tasking, and when you finally know how to go about it, how to reduce surety bond becomes the main issue. To get a better cost, ensure that you take care of all old liens and judgments. Again, ensure to state the financial strength of your business and your adherence to worthy business practices. 

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Submit your Application and Obtain Your Texas Car Dealer License

Double-check your documents and application form before submission. Keep copies of the documents you’re going to submit as well as your application letter. Submit your application form and pay the relevant application fees. Wait for a verification email from TxDMV.

Congratulation. If you are successful, you will receive your license via email, and you are ready to start your auto dealer business in Texas.  

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