What is a Texas Motor Vehicle Dealer Bond?

Know the steps in acquiring this surety bond!

The Texas Transportation Code requires you to secure a surety bond if you are selling, buying, and exchanging more than five different vehicles per year.

You need this bond to be issued a motor vehicle dealer general distinguishing number or a wholesale motor vehicle auction general distinguishing number.

A general distinguishing number (GDN) is a license issued to a motor vehicle dealer that will legally permit him to conduct his business in Texas. There are seven types of GDN:

  • Wholesale motor vehicle dealer
  • Franchised motor vehicle dealer
  • House trailer dealer
  • Trailer or semi-trailer dealer
  • Independent motor vehicle dealer
  • Motorcycle dealer
  • Independent mobility motor vehicle dealer

 

What is a Motor Vehicle Dealer Bond for?

This surety bond is an agreement between these three parties:

Principal – Motor Vehicle Dealer

Obligee – Motor Vehicle Dealer Client

Surety – Surety bond company

The Principal will purchase the bond through the Surety for the benefit of the Obligee. If the Principal fails to perform his duties, the Obligee has the right to file a claim on the surety bond up to its full face value.

This surety bond will also act as a guarantee that the motor vehicle dealer will strictly comply with the provisions of the Texas Transportation Code, rules and regulations of the Texas Department of Motor Vehicles, and the laws of the state.

 

How much is the bond amount and what are the conditions?

  • The bond amount is $25,000.
  • The bond should be in a form that is approved by the attorney general. The said form should be included in all of the following:
    • Payment by the applicant of all valid bank drafts that include checks drawn by the applicant to buy motor vehicles.
    • The good title of each motor vehicle that the applicant sells.
  • The clients of a motor vehicle dealer that’s been issued a motor vehicle dealer general distinguishing number or a wholesale motor vehicle auction general distinguishing number should be eligible for claims within the validity period of the GDN.
  • The bond should remain valid for at least two years.

 

How can I get a Motor Vehicle Dealer Bond?

Easy! Just send an application to a surety bond company that is authorized in the state of Texas. The company will help you go through the bond process efficiently.

An underwriter will thoroughly check your financial capability, business history, and credit score. You will immediately receive your bond once qualified.

If you want to get started on yours today, get your FREE quote now!

 

Other requirements to become a Motor Vehicle Dealer in Texas

  • Completed application form (LF001)
  • Completed Ownership Information form (LF601)
  • Submit proof of identity; assumed name certificates; certificates of incorporation, organization, or partnership; and additional same city locations of the same type of license
  • Pay the necessary fees:

$500 – 1st year of GDN

$200 – the subsequent year of valid GDN

Ready to get your bond? Talk to us today!