How to Be a Texas Car Dealer

What is a Texas dealer license?

A Texas auto dealer license provides the legal authorization to sell used cars in the state. To become a Texas car dealer, you must apply for a license. First of all, to be a Texas car dealer, you will need a general distinguishing number (GDN), which will allow you legally to act as a car dealer in the state. The state will provide your GDN license, which are broken into categories. Most commonly, people are interested in becoming independent motor vehicle dealers. For this type of GDN, dealers “may buy, sell, or exchange any type of used cars, trucks, motor homes, and neighborhood vehicles,” according to the Texas Department of Motor Vehicles (TxDMV). Dealers with this license “may buy, sell, repair, or rebuild salvage motor vehicles and nonrepairable motor vehicles.” And they “may use dealer’s temporary tags, buyer’s temporary tags, and metal dealer license plates on motor vehicles only” (from the TxDMV website).

Do I need a dealer license?

If you are at all serious about the business, then YES. An individual is allowed to sell up to four vehicles per year without a dealer’s license – kind of tough to make any money that way, huh? Plus, every one of those vehicles has to be titled in YOUR name before you sell it. Why does that matter? Because that means you will be paying 6.25% in sales tax on each vehicle you buy – BEFORE you sell it! Licensed dealers do NOT pay sales tax on vehicles they acquire for their inventory.

So, what do I need to get my license?

On the most basic level, to be a Texas car dealer you’ll need a physical location for your dealership that meets the state’s premises requirements and a dealer surety bond in the amount of $50,000. Dealer licenses are $700 + dealer plates and are issued for two-year terms. The licensing application, as well as additional reference materials, can be found on the TxDMV website.

Let’s take a look at what documents you’ll need. Make sure that you have the following items saved electronically so that you can upload them to your application!

• You’ll need to provide a $50,000 Motor Vehicle Surety Bond, also called a dealer bond.
• You’ll need to provide proof that you have completed this course.
• You will also need a copy of your lease or proof of property ownership.
• You’ll be asked to submit a business photo clearly showing the business structure and mounted business sign.
• You’ll need to provide proof of identity for all owners and manager of your business.
• If you plan to use an Assumed Name, or “Doing Business As” (DBA) name, which is a name different than your legal entity, then you’ll need to provide the Assumed Name Certificate.
  • Sole Proprietors and General partnerships can obtain the Assumed Name Certificate from the county clerk’s office in the county where the business is located. All other entity types will need to obtain an Assumed Name Certificate from the Texas Secretary of State.
  • You’ll also need to provide your Certificate of Filing from the Texas Secretary of State, although this does NOT apply to those applying as Sole Proprietors or General Partnerships.

There’s got to be more to it than that, right?

Oh yes, most definitely. A LOT more. And you will find most of the answers in the required pre-licensing education course that you can take here on TexasDealerEducation.com. We offer the most comprehensive and engaging course available that covers everything you need to know about how to be a Texas car dealer. And don’t just take our word for it. Our website also offers a healthy dose of Q&As about obtaining your independent dealer’s license.

I heard I could just sell under another dealer’s license instead of getting my own…true?

Well, you could…however, it is illegal, and could result in civil proceedings being brought against you by TxDMV, the OCCC or both. Maybe worse, either agency could then oppose you ever getting your legitimate license. So DON’T DO IT.

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

You can’t. Under Texas law, you are required to have a licensed location to sell vehicles. If you don’t, law enforcement can (and will) seize your vehicles, impound them and not release them without proof of ownership in YOUR name on the front of the title. So get your license, join TIADA and get on the good guys’ team!

Who do I use for insurance, dealership management software, service contracts, floor planning…and everything else?

Great questions. TIADA does not endorse any specific providers, but TIADA members can search our Membership Directory in each category to see what companies are also members. It’s one of the perks of membership. You should also have a look at our Business Partners.

Can I be a TIADA member?

Sure! But the association is focused on licensed dealers. You can join today and once you get your GDN, we will be glad to add it to our system.