Texas Auto Dealer Bond

As the only state that enters the United States through treaty rather than territorial annexation, the Lone Star State is known for barbecue, bat, football, and large open land. Big cities such as Austin and San Antonio are some of the highest growth cities across the United States. You are reading this article probably because you would like to set up a new dealership in Texas or continue the success of your existing dealership. 

The Texas Transportation Code Sec. 503.033 Security Requirement states that no General Distinguishing Number (GDN) will be issued or renewed unless the applicant provides to Texas Department of Motor Vehicle the proof of the $5,000 surety bond from a surety approved by the Texas DMV.


  • Who Needs It: Independent Motor Vehicle Dealers, Independent Motorcycle Dealers, Wholesale Dealers
  • Bond Amount: $50,000
  • Cost: Starts at $250 for two years, dependent on the applicant’s credit score

You can click on the “Quote” button below to obtain your FL Auto Dealer Bond quote. 

Sample Payment and Performance Bond Form
Sample Texas Dealer Bond
Motor Vehicle Dealer Bond

Bond Term: 2 Years

Obligee: Texas Department of Motor Vehicles

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Texas Auto Dealer Bond FAQs

Why Is the Bond Only Required for Independent Dealers, not Franchise Dealers? 

Bond is set up to protect the buyers from fraudulent acts of the bonded dealers. Franchise dealers tend to go through extensive vetting and training by their vehicle brand franchisor (i.e., Honda). They sometimes need to go through years of training and examinations before granting a license to sell on behalf of their brand. In addition, they tend to sell mostly brand new vehicles, which tend to have clean titles and no car issues. Therefore, to the Department of Motor Vehicles, there is less room for the franchise dealers to commit frauds. Therefore, they determine no bond is needed for franchise dealers. 

If I Want to Buy the Bond Today, can the Bond Effective Date Be Today? 

The Texas Dealer Bond has an unique rule for effective date and expiration date. Your bond will always be effective the 1st day of the month of your bond issuance date and expires at the last day of the month 24 months later. A good example is if you are buying a bond on Sep 26 2023, then the effective date of your bond would be either Sep 1st 2023 or October 1st 2023, whichever date you choose. If you choose to pick the start date as Sep 1st 2023, then your bond would expire on August 31 2025, which is exactly the month prior to the effective month but two years later. If you pick October 1st 2023 to be the start date, then the expiration date would be November 30 2025. 

Can I Buy a Multi-Year Bond to Lower the Annual Bond Cost? 

No, your Texas auto dealer bond always has a two year bond term. You can’t buy more than two years. 

Do I Need to Physically Mail the Bond? 

No, you can submit the bond Texas DMV eLICENSING site. We will email your bond and you just need to sign and upload it to the DMV site. 

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How Do I Ensure My Bond Will Be Accepted by the DMV? 

You want to check a few things on your bond after receiving it from your agent

  • Bond Number on the right top corner of your bond
  • Your business name, DBA, business street address, city, state and zip
  • Bond Amount of $50,000 written both in “$50,000” and “FIFTY THOUSAND DOLLARS”
  • Effective Date and Expiration Date of the Bond
  • Date of Your Signature, Your Signature, Your Business Name Typed Out
  • Date of the Surety Signature, Surety Name Typed Out, and Name of the Attorney In Fact

Does the Dealer Have Any Obligation Under the Bond

The Texas auto dealer bond is created to protect against specific scrupulous behaviors of the bonded motor vehicle dealers. The Section 503.033 of the Texas Transportation Code the Texas motor vehicle dealer bond will requires the bond holders to the following two actions

  • Purchase vehicles with valid form of payments
  • Maintain clean title of the bond they purchase under their name and transfer title for each vehicle they sell 

What Are the Bonds Protecting Against? 

The bonds are used to protect against unethical behavior of the bonded motor vehicle dealers, which include but not limited to the following actions: 

  • Misrepresenting warranty coverage
  • Falsifying your personal information to coerce you into agreeing to a higher interest rate
  • Disclosing material information, such as malfunctions and damages to a vehicle 
  • Lumping license fees and registration/transfer/titling fees

What Happens If There is a Claim? 

A claim can be made for any of the actions described above. When a claim is filed, the surety company may hire a lawyer to investigate the claim. If the surety believes that the claim is valid, they will pay out the claim. Then, they will most likely discontinue the dealer’s bond. Then, they will collect reimbursement from the bonded dealer whose bond triggers the claim. Note that this is the major difference between an insurance policy and a surety bond. The surety company recoup their claim loss at all costs, through either directly asking for cash reimbursement or taking over the assets of the bonded individual. Surety Bond is a line of credit, not an insurance policy 

Can the Claim Amount Be Larger Than the Bond Amount

The claim against the bond can’t exceed the bond amount. Therefore, even if there are multiple claims that add up to more than $50,000, a maximum of $50,000 can be paid out. The claim amount is limited to the payment that the buyers made to purchase the car, the cost of the car title, and the attorney fee involved in suing the auto dealers. 

What is the GDN and How Is It Related to the Bond? 

A GDN is formally known as a general distinguishing number, which is another name assigned to a type of used dealer license in Texas. It is specific to a class of used vehicle for which the applicant is allowed to sell. A GDN may or may not need to be accompanied by a bond. We know that GDN that allows independent dealers to sell used vehicles, used motorcycles, and new mobility vehicles and wholesalers to sell any vehicles are required to be accompanied by a bond. A GDN for trailer / semi trailer dealers, travel trailer dealers don’t need to be accompanied by a bond

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