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How to Get an Auto Dealer Bond in Texas (7 Easy Steps)

Auto dealer bonds are essential for Texas car dealerships, ensuring compliance with state regulations and protecting against financial losses.

An auto dealer bond is a type of surety bond required by the Texas DMV, guaranteeing that dealers adhere to laws and ethical practices.

Having this bond enhances trust with customers, provides financial security, and helps maintain a reputable dealership.

Texas Auto Dealer Bond Takeaways

  • Lowest Cost: $225 for the required two-year term
  • Bond Amount: $50,000
  • Who Needs It: All dealers who seek to buy, sell, or exchange motor vehicles either directly or indirectly
  • Bond Purpose: To ensure the public will receive compensation for any damages should the auto dealer fail to comply with dealer licensing law
  • Who Regulates Auto Dealers in Texas: The Texas Department of Motor Vehicles (TxDMV), Motor Vehicle Division

Steps to Get an Auto Dealer Bond in Texas

Getting an auto dealer bond is crucial in starting your dealership in Texas.

This guide walks you through each step to meet legal requirements and secure your bond smoothly.

Step 1: Determine Your Bond Type and Amount

  • Identify Your Dealership Type: Determine if you’re opening a new car dealership, used car dealership, or wholesale dealership.
  • Check the Required Bond Amount: Verify the required amount with the Texas Department of Motor Vehicles (TxDMV). Typically, $50,000 for most dealer types.
  • Understand the Purpose: Know that the bond amount reflects the level of financial protection required by the state to cover potential damages or claims against your dealership.

Step 2: Research and Choose a Surety Bond Provider

  • Gather Multiple Quotes: Contact three surety bond companies to compare rates and terms.
  • Evaluate Providers: Look for providers with a strong reputation, positive customer reviews, and competitive rates. Check their Better Business Bureau (BBB) rating.
  • Check Licensing and Accreditation: Ensure the provider is licensed to issue bonds in Texas. Also, check if they’re accredited by the National Association of Surety Bond Producers (NASBP).
  • Ask About Customer Support: Confirm that the provider offers good customer support and can assist with any questions or issues that arise during the bonding process.

Step 3: Complete Your Bond Application

  • Prepare Personal Information: Have your full name, address, contact details, and Social Security number ready.
  • Provide Business Information: Gather details about your dealership. This includes its name, address, business structure (e.g., sole proprietorship, LLC), and type of vehicles sold.
  • Submit Financial Documents: Be ready to provide financial statements, tax returns, and other documents the surety requests.
  • Understand the Credit Check: Be aware your personal credit history will be evaluated as part of the application process.

Step 4: The Bond Underwriting Process

  • Credit Score Impact: Know that a higher credit score typically results in a lower bond premium.
  • Financial Review: The surety may assess your financial stability, including your business plan and financial history.
  • Possible Additional Requirements: Be prepared for the surety to request additional information or collateral if they deem it necessary.

Step 5: Pay Your Dealer Bond Premium

  • Understand the Premium Calculation: The premium is a percentage of the total bond amount, influenced by your credit score, business experience, and financial stability.
  • Explore Payment Options: Some surety providers may offer flexible payment plans. Inquire about these options to manage cash flow.
  • Keep Records of Payment: Retain proof of payment and any related documents for your records.

Step 6: Receive and File Your Dealer Bond

  • Processing Time: Expect to receive the bond within a few days to a week after approval.
  • File with TxDMV: Submit the original bond (not a copy) to the Texas Department of Motor Vehicles and your dealer license application.
  • Verify Filing: Confirm with TxDMV that they have received and accepted your bond.

Step 7: Maintain Your Dealer Bond

  • Renew Bi-Annually: Set reminders to renew your bond well before the expiration date to avoid lapses in coverage.
  • Stay Compliant with Laws: Adhere to all state regulations and maintain good business practices to avoid claims against your bond.
  • Address Claims Promptly: If a claim is made, respond quickly and work with the surety provider to resolve the issue. Address the root cause to prevent future claims.


Also Read: Auto Dealer Bonds: The Essential Guide for Dealerships

Types of Auto Dealer Bonds in Texas

Different types of auto dealer bonds are required depending on the dealership’s operations. Here are the main types:

  1. Franchise Dealer Bond: Required for dealers who sell new vehicles. These bonds ensure compliance with franchise laws and regulations.
  2. Used Car Dealer Bond: Required for dealers who sell used vehicles. These bonds protect consumers and the state from fraud and unethical practices.
  3. Wholesale Dealer Bond: Required for dealers who sell vehicles to other dealers rather than to the public. These bonds ensure wholesale transactions are conducted legally.
  4. Motorcycle Dealer Bond: Specific to dealers who sell motorcycles. These bonds cover both new and used motorcycle sales.
  5. Trailer Dealer Bond: Required for dealers who sell trailers. These bonds ensure compliance with state laws specific to trailer sales.


Also Read: Auto Dealer Bond vs Dealer Insurance: What’s the Difference?

How Much Does a Dealer Bond Cost in Texas?

Curious about the cost of getting an auto dealer bond? Here’s what you can expect to pay and what influences the price.


Credit Score Annual Premium Monthly Cost
Excellent (750+) $131.25 $14.00
Good (700-749) $187.50 $20.00
Fair (650-699) $250.00 $27.00
Poor (600-649) $375.00 $42.00
Very Poor (Below 600) $625.00 $70.00

Cost Factors:

  • Bond Amount: The required bond amount in Texas is $50,000.
  • Factors Affecting Cost: The dealer’s credit score mainly influences the premium rate. Other factors include business experience and financial history. See our list of reasons why dealership bonds increase in Texas.
  • Payment Plans: Some surety providers offer flexible payment options; inquire with your provider.


Also Read: How to Lower Auto Dealer Bond Costs

What Are the Auto Dealer Bond Requirements in Texas?

Knowing Texas’s legal requirements for auto dealer bonds is vital for compliance and smooth operations. Here are the key points:

  1. Bond Amount: Texas requires a $50,000 auto dealer bond for most dealership types.
  2. Licensing: You must obtain a dealer’s license from the Texas Department of Motor Vehicles (TxDMV) before starting operations. The bond is a prerequisite for this license.
  3. Application Process: Submit your bond and the dealer license application to TxDMV. Ensure all information is accurate to avoid delays.
  4. Renewal: You must renew your bond annually. Set reminders to renew your bond on time to maintain your dealer’s license.
  5. Compliance: Adhere to all state regulations to avoid penalties and ensure your bond remains in good standing.

Tips for Managing Your Texas Auto Dealer Bond

Want to manage your auto dealer bond like a pro? Stay compliant and avoid common pitfalls with these essential tips.

  1. Consult with Industry Experts: Seek advice from bonding experts, legal advisors, or experienced dealers to ensure compliance and smooth processing.
  2. Join Dealer Associations: Consider joining associations like the Texas Independent Automobile Dealers Association (TIADA) for resources and networking opportunities.
  3. Maintain Detailed Records: Keep comprehensive records of all transactions, communications, and financial documents. These simplify the bonding and renewal process.
  4. Use a Checklist: Create a checklist to track each step and ensure nothing is overlooked.
  5. Stay Informed About Regulations: Regularly check for updates on Texas auto dealer regulations to ensure ongoing compliance and avoid penalties.

Common Pitfalls and How to Avoid Them

Avoid mistakes that can cost you time and money. Here’s how to sidestep common pitfalls in managing your auto dealer bond.

  1. Incomplete Applications: Double-check that all sections of the bond application are completed accurately to avoid delays.
  2. Ignoring Credit Issues: Address any credit issues before applying to improve your chances of securing a favorable premium.
  3. Missing Renewal Deadlines: Set calendar reminders to renew your bond on time and avoid lapses in coverage.

Also Read: How to Avoid Auto Dealer Bond Claims

Secure Your Auto Dealer Bond with TMD

Secure your auto dealer bond with TMD today for a hassle-free and reliable experience. 

Enjoy the ease of working with industry experts dedicated to helping you meet Texas regulations. 

Need to get bonded today? Secure your Texas auto dealer bond now.

Auto Dealer Bond FAQs

An auto dealer bond is a surety bond required by the Texas DMV, ensuring car dealerships comply with state regulations and ethical practices, protecting customers and the state from fraudulent activities.

Yes, you can get an auto dealer bond with bad credit. However, it may come with higher premiums due to increased risk perceived by the surety company.

Getting bonded in Texas typically takes a few days to a week, depending on the completeness of your application and the responsiveness of the surety company.

No, you cannot transfer your dealership bond if you change locations. You will need to cancel your current bond. Then, apply for a new bond for the new dealership location as per Texas state requirements.

If a claim is made against your auto dealer bond, the surety company will investigate. If the claim is valid, the surety will pay the claim amount, and you will be responsible for reimbursing the surety for the paid amount.