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.
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.
No, your Texas auto dealer bond always has a two year bond term. You can’t buy more than two years.
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.
You want to check a few things on your bond after receiving it from your agent
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
The bonds are used to protect against unethical behavior of the bonded motor vehicle dealers, which include but not limited to the following actions:
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
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.
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