Before you begin your auto dealership in Texas, you need to get an auto dealer license. This is an essential element of the process, as a car dealer’s license is legally necessary for the sale, purchase, and exchange of cars. If you’re planning on selling or trading more than five cars, you’ll need a dealer license to do business. Auto dealer licenses protect both the consumer and the seller and are the means to legally act as a car dealer within the state. It is likely that the prospective dealer will undergo a background check as part of the licensing process. 

Here, we’ll outline the six steps to get your auto dealer license in Texas. 

How to Obtain a Texas Auto Dealer License

1. Figure out which type of dealer license you need

If you are planning on selling and/or buying vehicles, the most common license to get in Texas is a Motor Vehicle License. This license allows you to sell, buy or exchange used cars, trucks and more. To determine if this is right for you, identify the type of vehicles you will be selling by selecting from the following range:

• Motor Vehicle license for used vehicles 
• Motorcycle license for used motorcycles and ATVs 
• Travel Trailer license for used travel trailers 
• Utility or Semi-Trailer license for new and used utility or travel trailers 
• Wholesale license for selling wholesale to other licensed dealers with no retail sales
• Wholesale auction license for selling vehicles at auction 
• Mobility vehicle license for vehicles equipped to transport disabled persons
• Franchise license for new cars only 

It is important to note that a dealer who wants to work in multiple categories must obtain a license for each type of vehicle. 

2. Create your business & take required Dealer Education courses

You’ll need to legally form your company before applying  for your car dealer license. This includes certification of incorporation, organization, or partnership. A copy of your certificate, approved by the Texas Secretary of State, will need to be included with your application. 

At this stage in the process, you must also enroll in a dealer education course. The course is provided by the Texas Independent Automobile Dealers Association.

3. Create your permanent business location

You’ll need a permanent business location before applying for your license. The requirements are the following:

• A building or location within a building that has connecting exterior walls on all sides.
• The location must comply with zoning ordinances and DMV requirements for dealership premises.
• The business location may not also be used as a residence.
• A valid mailing address is required.
• The dealership must have an office containing at least two desk chairs, a working telephone, and internet access. The telephone number must be listed under the business name or the name under which the dealer does business.
• A permanent sign must be visible outside the business with the letters at least six inches tall.
• There must be an illuminated, on-site display area with space for at least five vehicles.
• The business location must either be owned by the dealer or have a written lease agreement.
• The business needs to be open at least four days per week and at least four consecutive hours on those days; these hours must be posted by the main entrance.
• Either an employee or an answering service must answer the phone on weekdays between 9 am and 5 pm.

4. Get a Texas auto dealer bond 

A Texas auto dealer bond costs a percentage of the total bond amount. As of September 1, 2021, the total bond amount has increased from $25,000 to $50,000. The percentage of the bond premium will depend on your creditworthiness. Several online tools can help you find a quote for your auto bond. If you have good credit and good financial history, the bond percentage can be as low as 1-3%. 

Note that dealers selling travel, utility, or semi-trailers do not need to obtain a surety bond. 

5. Gather additional documents

There are a few more documents you’ll need to complete your application submission: 

• Photocopy of driver’s license or another form of official identification.
• If the business is running under an assumed name, a certificate of assumed name is required.
• A map showing the precise location of your dealership. 
• An application for eTAGS.

6. Send the completed application to the Texas DMV

You can mail, fax, or email the completed application to the DMV. 

Mail: P.O. Box 26487
Austin, TX 78755
Fax: (512) 465-5634

Email: MVD-scancenter@TxDMV.gov

Additional fees include:

• $350 license fee
• $700 General Distinguishing Number License Fee
• $90 per dealer license plate

The state of Texas will approve or deny the application once you submit all materials. If your application is missing any information, you will be notified and have a chance to submit the missing materials. The average time for approval is 2-3 weeks if all materials are submitted correctly. 

All licenses are valid for two years from the first day of the month in their month of issue. They must be visible in the business location. 

This is not intended as legal advice. If you have questions about dealer licensing requirements, please seek the assistance of legal counsel.

Become an ACV Auctions member when you get your Texas Dealer License

ACV Auctions can help you source your inventory in Texas when you become a dealer. Since we are an online auction, we have inventory from all over Texas, spanning from El Paso and Dallas to San Antonio, and Houston. We also make it easy to source inventory nationwide. 

After you get your Texas Dealer License, register with ACV. There are no membership fees to join ACV, and our transparent vehicle condition reports give dealers everything they need to know to bid confidently on inventory.

Sources

1.  JW  Surety  Bonds.  (2022). How to  Get a Texas  Auto  Dealer  License. JW  Surety. Retrieved  December 7, 2022, from https://www.jwsuretybonds.com/states/texas/auto-dealer-license
2. DBL Surety Bonds. (2022). How to get a Texas Dealer License. DBL Surety Bonds. Retrieved December 7, 2022, from https://dblsuretybonds.com/get-texas-dealer-license/
3. Lance Surety Bond Associates. (2022) Your Ultimate Texas Dealer License Guide. Lance Surety Bond Associates. Retrieved December 7, 2022, from https://www.suretybonds.org/blog/texas-dealer-license-guide