Car Dealer License in Texas: With & Without a Lot

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How to Get a Car Dealer License in Texas

It is nice to have enthusiasm for starting a car dealership business in Texas. However, before you dive in, you have to understand the code of conduct imposed by the state of Texas in regard to operating a car dealership. To start a dealership in this state, the regulations require you to have a Texas auto dealer license and an auto dealer bond.

Getting a license might seem difficult at first, but understanding the process inside out will help you avoid the headaches and focus on your business.

Identify the Type of License You Need

What do you have to do to start selling cars in Texas?

To deal with used cars, first, you ought to have obtain a general distinguishing number (GDN) issued by the Vehicle Division of the Texas Department of Motor Vehicles (TxDMV). This is the most important step towards becoming a licensed car dealer.

First, you must decide what type of license you need. Look around the TxDMV list of licenses to get help. There are varieties of licenses for dealing with different types of cars:

  • Independent Motor Vehicle – permits you to deal with preowned cars, trucks, homes on wheels, and neighborhood vehicles.
  • Independent Motorcycle – permits you to deal with preowned motorcycles, scooters, and ATVs.
  • Travel Trailer – allows you to deal with preowned trailers.
  • Trailer/Semi-trailer – you can use this license to deal with utility trailers as well as semi-trailers.
  • Wholesale Dealers – permits you to trade with dealers only if they are licensed by the State of Texas.
  • Independent Mobility Motor Vehicle Dealer – gives you the permission to trade unused mobility vehicles.

It is possible that your business will overlap these areas of work and you’re going to need more than one GDN.

When exactly do you need to have multiple GDNs? Here is a quick list of cases when you might need extra GDN:

  • Dealers who work as franchisees must receive a franchise license as well as the GDN.
  • Dealers who work as franchisees must receive a distinct franchise license for every additional location where they sell vehicles.
  • If you operate in multiple cities, you’ll need additional GDN.
  • If a dealer intends to sell multiple kinds of vehicles, he/she will need an additional GDN.

Keep in mind: You must apply for every license individually. You can operate many dealerships in a single city under one GDN.

Understand Which Dealer Licensing Requirements Apply to You

Normally it is the DMV’s eLicensing platform that handles licensing in the state of Texas.

While filling out a license application, you’ll be asked to enter the following details:

  • The filing number which you must’ve received after registering your corporation with the Texas Secretary of State.
  • The employer identification number of the incorporated entity or the SSN of the person who owns the corporation.
  • If you’ve been issued a license in the past, enter the numbers that were assigned to you.
  • The number you’ve received after securing a $25,000 motor vehicle dealer surety bond. Also, specify the company that issued the bond and the validity duration of the bond.
  • If you’re going after an IMMV GDN license, you’ll also be required to enter your Converter License number.
  • Archives that include copies of the official documents that indicate the following details:
    • Assumed Name Certificate for every individual DBA
    • A document to identify you (driver’s license, a passport, official ID card)
    • Motor Vehicle Surety Bond, which contains a signature and date of the owner.
    • Power of Attorney details in regard to working with the surety bond.
    • Documents proving Incorporation, Registration, or Formation acknowledged by Texas Secretary of State.
  • Some kind of document (lease or deed) associated with the dealership real estate
  • If some personnel filling the representative role have a criminal history or are currently being prosecuted, the criminal background information must be provided for every person in detail.
  • Official documents issued by the court that show adjudication, dismissal, or other decision made for every offense.

If you want your application to be accepted right away, be very diligent when filling out the application form and when organizing supplemental documents. Make sure you enter your contact information correctly so that TxDMV can get in touch if necessary.

To get in-depth information about each prerequisite, check out Dealer Manual (“Dealer” tab). All the documents that you need for your application can be found on the Dealer Forms page.

Keep in mind: It is permitted to start your application even if you don’t have one of the prerequisite documents yet. You can submit such documents later on. If you’re already a licensee, It is crucial to include information about other GDN licenses.

Research Your Bonding Options

You can’t get a Texas dealer license without first securing a Texas auto dealer bond that is valued at $25,000 or more. The only licensees who are exempt from this prerequisite are franchised dealers and people who do business with travel trailers or trailer/semi-trailers.

This bond secures a contractual relationship between your corporation (the principal), the TxDMV (the obligee), and the surety that acts as a bond provider.

Texas dealer bond is intended to ensure that your business will follow through on all obligations for which you have a contract. It is a third-party guarantee to your potential customers that guarantees your compliance with the law.

As a potential car dealership owner, you must pick your surety bond agency with precaution. Choose one that is a long-standing reputable business to ensure a proper safety net for your car dealership business.

Submit Your Application and Obtain Your Dealer License

Once you’ve gathered all the supplemental documents and received your bond from a trustworthy surety agency, you can proceed to submit your full application. The documents that you prepared might be useful in the future, so it wouldn’t hurt to keep their copies.

Normally, the licenses only last two years. You also have to cover the application fees when submitting it. First, your payment will be verified. Once the payment has cleared, you’ll receive the Work Item Number associated with your application, and the review process will begin. You should get an email message that describes the status of your application.

If your application is missing some files, TxDMV will contact you as soon as possible. Once approved, your license will be mailed to you in printed condition. Double-check the mailing address that you specify in your application.

Once you’ve received your dealer’s license, there’s nothing that can hold you back from starting a dealership business.

It’s not easy to receive a car dealership license in Texas, but there are some things you can do to go through the process without many headaches.

How to Get a Car Dealer’s License Without a Lot

Do I Need a Car Lot to Get a Dealer’s License?

Having a large, sophisticated lot isn’t a prerequisite for success in the car dealership business. There are multiple individual dealers who operate with smaller lots. Some of them run dealership businesses without owning a lot. If you’re a beginner in the car dealership business, this might be the most practical solution for you. It is an uncomplicated way to start your car dealership business. You don’t want to risk a lot of money by buying large inventory straight away.

Having a lot is definitely not a prerequisite for getting a car dealership license in the State of Texas. However, you must consider certain issues. You must secure a car dealer bond to get licensed in this state. That’s why you need Surety Bonds Direct. In the later parts of the article, we’ll discuss the possibility of getting a car dealer’s license without owning any inventory. We’ll also go over car dealer surety bonds.

Do You Need a Dealer’s License?

If you’re selling few cars and unsure whether you need a license or not, read on.

You don’t need a license if you’re selling a car that you own. However, when you want to sell more cars, things get a little complicated. Most states have laws that set the maximum limit for how many cars an individual can sell every year. Also, not having a license will cut your access to dealer auctions, which is the best place to find the used car inventory to sell.

Occasionally, small businessmen who want to get into the car dealership business “rent” a dealer’s license by paying a small fee in exchange for access to dealer auctions and other perks of a license. We do not recommend that you go down this route because it is a legal grey area. If you want to start a legitimate business, you’re better off by getting a real car dealership license. If you are found to be selling used cars without a proper license, the TxDMV will be more cautious when reviewing your license application in the future.

Steps to Get Your License without a Lot

The good news is that you can still get a license without a lot. The process for getting a license without a lot is quite similar to normal proceedings. Preparing an application and gathering all the necessary documents might seem daunting at first, but it is entirely possible to navigate through the process with proper guidance. You’ll have to follow these steps:

  • Get in touch with the local Department of Motor vehicles or Department of Licensing and ask about the required documents, forms, and any other issue related to licensing.
  • Enter the necessary information in the application packet. Normally, you’ll have to provide:
    • Required documents for DBA creation.
    • Thorough business plan
    • Proof of having a business license issued by your municipality
    • Results of a background check, your credit history
    • Document showing that you’ve secured a surety bond
  • Mailing your application packet along with associated fees and notarization documents specified by the state.

There are some problems that might arise when you’re running a dealership without a lot. If you intend to show off your car inventory at your family residence, make sure there are no laws against it. One more problem that might arise is that you’ll have to specify your business address on your documents. This is the address where your business files would be stored.

Texas Dealer License Renewal

After you’ve received a license, you can use it until it expires in two years. You can estimate the expiration date yourself, but the TxDMV will also notify you about expiration 75-90 days before it happens. It is your obligation to provide the DMV with the required files 45 days before the deadline.

If you are unable to renew the license within this time period, you’ll be penalized with “50 percent of the application fee amount for each 30-day period the license is expired.” It is impossible to renew your license 90 days after its expiration. After this grace period, the license will be revoked and you’ll have to start working towards it from scratch.

Keep in mind: To ensure that your license is renewed, your application should include additional documents showing that you’ve renewed your Texas auto dealer bond as well.

Dealer License Application Status Check

After submitting any kind of application, you’ll create its “application number”. This code is associated with your request and you can use it to check the current condition of your application. You’ll get to know when the application was received, who is the handler, and its current status.

Visit this page and enter the number associated with your application. Clicking “Submit” will take you to a page where you can see the current status of your request.

Call (888) 368-4689 to ask any questions that you might have. Alternatively, you can email DealerLicense@TxDMV.gov

Changing License Information

You are obligated to keep the details of your license up to date. You might have to edit this information:

  • Your contacts: address to receive mail about license-related issues, landline or cell phone number, or email.
  • Opening up new car dealerships in different locations or closing down existing car dealerships
  • Changes in business, such as transfer of ownership and other issues.

Log into the eLICENSING website and click on “Amend a License” or “Change General License Info” and enter up-to-date information.

Cancel License

If you decide to stop your car dealership operation, access your eLICENSING account and click on the “Close a License” option. The license will not automatically end once the expiration date is passed. Once you’ve successfully closed your license, you must return all plates, temporary tags, and other accessories to TxDMV right away.

FAQ

How Long Does It Take To Get A Texas Dealer License?

Once your application has reached the state, it can take up to 2-3 weeks to issue your license. If your application is missing a certain document or a record, you’ll be asked to provide it via mail. Obviously, this will slow down your process because your application can’t be approved until you’ve provided the file.

How Long Is My License Good For?

A car dealership license issued by TxDMV is valid for two years. The countdown will begin on the first day of the month when it is issued and it will end after two years, on the last day of the previous month. For instance: a license that becomes valid on November 1st, 2016, will end on October 31st, 2018.

Do All Texas License Types Need A Surety Bond?

No, not all licenses require a surety bond. Those dealers selling travel, utility, or semi-trailers do not need to post a bond. However, all other independent dealers need to post a $25,000 surety bond. You can obtain one by applying for it online.

Who Doesn’t Need A License To Sell Vehicles In Texas?

In some cases, you do not need a license to sell cars in Texas. That’s the case if:

  • You sell no more than five cars in one calendar year, all of which are registered under your name.
  • Your operation falls under the classification of a local, state, or federal agency.
  • You’re selling a car involuntarily (forced sale)
  • You’re operating as an insurance coverage provider;
  • You’re a representative put in place by a court’s order.
  • The vehicle you’re selling is antique (25 years or older)
  • You’re selling a special interest car

What If I Want To Sell Used Cars And Trailers?

If you want to sell two types of vehicles that aren’t covered by a single type, you have to get both types of licenses and GDNs. GDN is short for general distinguishing number. This is the number that includes information about your license type and where your dealership is situated. To sell vehicles of a certain type, you need a license associated with that vehicle.

Can you get a dealer’s license with a suspended driver’s license?

The governing body that issues licenses in Texas (TxDMV) has every right to reject an application, or even suspend active licenses based on the information found in an individual’s criminal record.

These are the statutes that describe the relationship between past criminal record and licensing rights:

Learn more about this topic here: https://www.txdmv.gov/dealers/criminal-history-review-process

Could I just sell under another dealer’s license instead of getting my own?

It is entirely possible, but it is illegal and by doing so, you risk getting punished by the TxDMV, the OCCC, or both. In the worst-case scenario, you may be held back from getting a legitimate license forever.

I want to sell cars online, I don’t want to mess with getting a location or license. How can I do that?

Texas law obligates vehicle sellers to have a licensed location. If you try and bypass this law, law enforcement has every right to take away all of your stock and hold them until you submit a document that proves your ownership of the vehicles. You can avoid these headaches by getting a license, joining TIADA, and complying with other rules.

If I want to buy used RVs, repair them and flip them for a profit, would I still need to obtain an Independent GDN License from the state of Texas?

In the State of Texas, you are permitted to sell up to 5 cars as an unlicensed individual. Once you go past that threshold, you’ll have to get a GDN.

Texas Dealer License Cost

There’s a fixed cost of $700 for obtaining a GDN license application. Also, you’ll have to pay $90 for every additional dealer license plate. You’ll have to cover additional fees to obtain specific types of licenses.

Association Websites

  • Franchise: Texas Auto Dealers Association: tada.org
  • National Auto Dealers Association: nada.org
  • National Independent Automobile Dealers Association: niada.com
  • National Vehicle Leasing Association: nvla.org
  • Recreational Vehicle Industry Association: rvia.org
  • Texas Independent Automobile Dealers Association: txiada.com
  • Texas Motorcycle Dealers Association: txmda.org
  • Texas Recreational Vehicle Association: trva.org