Texas requires that those licensed in the state to sell motor vehicles must be licensed and obtain a Texas Motor Vehicle Dealer Bond. These auto dealer bonds can be purchased online in a few minutes.
Texas requires that,
All Independent Motor Vehicle Dealers must obtain a Texas Motor Vehicle Dealer Bond. Franchise Motor Vehicle Dealers are exempt from the bond requirement.
In Texas, a Franchise Motor Vehicle Dealer means:
In Texas, an Independent Motor Vehicle Dealer means:
Dealers can read the full Texas Code.
A Texas Motor Vehicle Dealer Bond Guarantees that a Motor Vehicle Dealer will pay valid bank drafts, including checks, drawn by the applicant to buy motor vehicles and transfer good title to each motor vehicle that the dealer sells. The Motor Vehicle Dealer Bond may also be used to pay for attorney's fees that are incurred in the recovery of the judgment and that are reasonable in relation to the work performed.
Any person may make a claim against the Texas Motor Vehicle Dealer Bond for judgments assessing damages and reasonable attorney's fees based on an act or omission on which the bond is conditioned that occurred during the term for which the general distinguishing number was valid. Any payment by the Surety Bond company will immediately be reported to the Texas Department of Motor Vehicles.
In short, the Texas Motor Vehicle Dealer Bond is in place to protect parties from fraudulent dealings and payments of the Independent Motor Vehicle Dealer.
Each Independent Texas Motor Vehicle Dealer must obtain a bond in the amount of $50,000. The bond amount was formerly $25,000 but was increased in 2021 by Texas House Bill 3533.
The Texas Motor Vehicle Dealer Bond amount is open to successive claims. However, the $50,000 bond amount is the most that the surety bond company is required to pay, regardless of the number of claims, the amounts of the payouts, or the number of years the surety has written the bond for the dealer.
Texas Motor Vehicle Dealer Bonds can be purchased online instantly, with only a credit check. These bonds can then be printed and used in minutes. An applicant for the bond will need the following:
The dealer must also answer two questions including:
Generally, dealers with bad credit and/or bankruptcies can still obtain bonds. These dealers should expect to answer additional questions about the circumstances surrounding their credit challenges. However, Texas Motor Vehicle Dealer Bonds are available for most parties.
The cost depends on the dealer’s credit and financial strength. Most dealerships can purchase the two-year bond for $525 online. Better pricing is available for dealerships who can show strong financial strength.
Alternatively, dealers with credit challenges should expect to pay more.
A Texas Motor Vehicle Dealer Bond must be active for the same period as the dealer’s license, which is a two-year period.
A motor vehicle dealer (called the principal) pays bond premium and provides indemnity to a surety bond company (called the surety). The Surety provides a strong third-party guarantee to the Texas Department of Motor Vehicles (called the obligee) that the dealer will provide good title and honor payments for vehicles.
If the dealer defaults on their obligation, those injured can make a claim on behalf of the state to the Surety. The Surety will have to pay those claims and can seek reimbursement from the dealer. The bond makes it easier for the public to collect, as the surety has the liquidity, financial strength and incentive to pay quickly. The dealer also has an incentive not to default as the surety will seek reimbursement for claims paid.
The Independent Motor Vehicle Dealer must post notice of the surety bond, and the procedure by which a party can make a claim against the bond. A suggested notice can be found here, or by clicking the image to the right. This notice must be posted in the same manner as the dealer post their GDN. Further, this notice must be on the dealer’s website along with the contact information for the Texas Department of Motor Vehicles.
Texas Motor Vehicle Dealer Bonds are not insurance and should not be treated as such. These bonds require indemnity, which means that if the bond company pays a claim, they can seek reimbursement from the dealer and other indemnitors under the indemnity agreement.
The dealer will likely still need to purchase property and casualty insurance for their dealership. More can be read about the differences between surety bonds and insurance.
Texas Motor Vehicle Dealer Bonds are required by Texas for Independent Motor Vehicle Dealers. These bonds are inexpensive and can be purchased online. Texas Dealers may also need other surety bonds such as tax bonds and notary bonds. These bonds can be purchased on our Texas Surety Bond page. Texas Dealers can also visit our Surety Bond Guide for more information on surety bonds, including frequently asked questions.
Axcess Surety is the premier provider of surety bonds nationally. We work individuals and businesses across the country to provide the best surety bond programs at the best price.
