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TEXAS
MOTOR VEHICLE DEALER BOND

Texas Motor Vehicle Dealer Bond

 

Getting a Texas motor vehicle dealer bond is a key step to becoming a licensed car dealer in the state. The motor vehicle dealer bond serves as an extra guarantee that your dealership will follow all rules and regulations that govern motor vehicle dealers in the state of Texas.

Just like all surety bonds, the Texas motor vehicle dealer bond serves as protection for the general public, and not as insurance for your business. In case you don't follow the rules and your obligations under the bond, a claim can be made against you. If proven to be a legitimate claim, the penal sum of the bond is used to compensate the affected parties. The surety covers the costs of claims up front, which you’ll be required to reimburse in full. This means you should avoided having any claims, as they can cause serious harm to your business and finances.

TIADA

Texas Motor Vehicle / Auto Dealer Bond Cost

While $50,000 might seem like a large amount to pay, in reality, you only need to pay a percentage of it to get bonded, which is called the bond annual premium. The surety company will look at several factors to determine your motor vehicle dealer bond cost, most importantly, your credit score. Factors such as years licensed and years of industry experience will also play a factor in your dealer bond cost.

  • If your credit score is above 650, you’ll likely have to pay between .75% and 2% of the bond amount.

  • For applicants with credit scores between 600 and 649, the rates range between 2.5% and 4%.

Texas Motor Vehicle / Auto Dealer License and Renewal

Who is required to be licensed?

The surety bond requirement applies to all GDN license types except for Trailer/Semitrailer and Non-Motorized Travel Trailer. The bond requirement does not apply to Franchised dealers issued a GDN license associated to a Franchised dealer license.

What are the bonding requirements?

  • Most dealers are required to obtain a $50,000 motor vehicle dealer surety bond, which is like an insurance policy for the dealer’s customers and is the only acceptable form of security. A separate bond is required for each GDN category that a dealer applies for The surety bond is required for: Motor vehicle dealers.

  • The bond must be valid for the term of the license (2 years). The bond must begin on the first day of the month and expire on the last day of the month, two years later. The expiration month will always be the month prior to the start date (for example, 9/1/20 through 8/31/22 or 1/1/20 through 12/31/21).

  • Motor vehicle dealer with multiple locations in different cities will be required to have a bond for each location. When you get your motor vehicle dealer bond with All American Bonds and Insurance we can help get you those extra bonds at a discount.  

What are the insurance recommendations?

It is recommended that all motor vehicle dealers in the state of Texas obtain liability insurance coverage. Some examples include:

  • Garage Liability Policy with a minimum of $85,000 Premises and Auto Liability Coverage

  • Dealer Inventory Physical Damage Coverage

  • Uninsured and Underinsured Motorist Coverage

  • Garage Keepers Coverage - (if you do repairs, or paint & body work)

  • Property Coverage for any buildings or tools

  • Medical Payments of $1,000, $2,000, or $5,000

Whether applying for your first auto dealer license in Texas, or renewing an existing one, you have to submit a dealer application form, together with all necessary documents that prove you meet the requirements.

When you renew your license, you’ll have to renew your Texas auto dealer bond as well. As your business finances and personal credit score can change, make sure you work on improving those stats, so that you can reduce your surety bond cost over the years.

Common Bond Types: (Many others are available)

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