What is a Texas auto dealer bond?
To become licensed as a motor vehicle dealer in Texas, you must purchase a two-year $50,000 surety bond. This bond ensures that dealers transfer titles for the vehicles they sell and pay for all the vehicles they purchase.
Get Your Auto Dealer Bond:
Texas Auto Dealer Bond Requirements
If you wish to operate as an auto dealer in Texas – regularly and actively buy, sell, or exchange vehicles from an established and permanent location – you will need a motor vehicle dealer bond. This includes:
- Independent motor vehicle dealers
- Franchised motor vehicle dealers
- Independent mobility motor vehicle dealers
- Wholesale motor vehicle dealers
Learn more in the Texas Transportation Code.
Why are auto dealer bonds required in Texas?
These bonds ensure that Texas auto dealers follow the Texas Transportation Code while operating. If an auto dealer engages in fraudulent activities or breaks state laws, the party that loses money can file a claim against the bond. If the claim is valid, the surety will cover the costs to settle the claim upfront. The dealer must later repay the surety in full (up to the total bond amount of $50,000).
How do Texas auto dealer surety bonds work?
An auto dealer surety bond is a three-party agreement between an obligee, a principal, and a surety. The official name of this bond is called a Texas Motor Vehicle Dealer Bond.
- Obligee: Texas Department of Motor Vehicles
- Principal: Motor vehicle dealer
- Surety: Financial institution that issues and backs the bond
The principal purchases the bond, the obligee enforces the bond terms, and the surety administers the bond and promises to back it financially in case of claims.
How much does an auto dealer bond cost in Texas?
Auto dealer bond premiums can vary based on applicants’ credit scores: the higher your credit score, the lower your annual premium. If you have excellent credit, expect to pay as little as 1% or less of the total bond amount. Other factors that may impact the cost of your bond include your industry experience and business and personal financials.
Once you’ve purchased your motor vehicle dealer bond from a surety provider like ZipBonds, remember to renew it before its expiration date each year. We send out reminders well before expiration dates approach. That way, you’ll have plenty of time to renew your bond and maintain your business license.
Frequently Asked Questions
Follow this general process to obtain a motor vehicle dealer license in Texas:
- Establish a permanent business location.
- Sign up for your Texas DMV eLicensing account.
- Apply for a license and provide the required information and supporting documentation.
- Obtain a $50,000 surety bond.
- Submit your application with payment for fees ($700 for each license and $90 for each plate/sticker).
Your license and bond will be valid for two years and must be renewed to remain active. Renew your license through the eLicensing portal by paying a $400 renewal fee. Renew your bond with your surety provider.
The bond amount required is $50,000. This is a two-year bond that must be renewed biannually.
You may still be able to get bonded by paying a higher premium. Expect to pay upwards of 5-10% if you have a low credit score.
Apply for an Auto Dealer Surety Bond in Texas
ZipBonds offers the fastest and most secure option for getting auto dealer bonds. Our all-digital platform is intuitive and straightforward. Apply online or call us at (888) 435-4191 to speak with an agent directly. Many of our bonds can be processed and issued immediately online.
Founders Ryan Swalve and Zach Mefferd formed the vision for ZipBonds.com when they realized how overly complicated it was to help clients place surety. The frustration of being unable to incorporate the technology they’d used in other insurance-focused projects left them thinking “there has to be a better way.”
Fast forward a couple of years, and that better way is the impetus of everything we do at ZipBonds. We constantly look for innovative ways to improve the bonding process for our clients and agents. Our team comprises individuals who understand all angles of surety – for companies, agencies, and individuals. Incorporating everyone’s point of view to improve the process while simultaneously integrating cutting-edge technology is what sets our business apart.