How to Get a Texas Motor Vehicle Dealer License

What is a Texas Motor Vehicle Dealer License? 

A Texas motor vehicle dealer license allows an individual or business to legally sell vehicles as a way to earn income in the state of Texas. Its purpose is to protect the general public from dealers violating the law. Selling vehicles without a license as a business has serious legal implications, so it is best to obtain your license. 

Do I need a Texas Motor Vehicle Dealer License? 

Yes, if you are selling more than 4 vehicles per year and the vehicles are not titled in your name. The Texas Department of Motor Vehicle only allows an individual without a motor vehicle dealer license to sell up to four vehicles per year and each vehicle needs to be titled in their names. By titling the car in your name, you are paying 6.25% in sales tax on each vehicle you buy. Not a great deal, right? Dealer with a motor vehicle dealer bond does not pay sales taxes on car purchase and can sell as many cars as their business allows.

Popular Types of Texas Motor Dealer License

In Texas, there are three large overall license types: Franchise, Independent and Salvage Dealer. 

  • Franchise license is necessary to sell new vehicles 
  • Independent license is the most popular license type and it allows you to buy, sell or trade used vehicles
  • Salvage license allows individuals to buy or sell more than five salvage or non repair vehicles in a year. It also allows a dealer to repair or rebuild more than five salvage vehicles in the same year

Each car dealer license will be given a General Distinguishing Number (GDN). Independent license is the most popular license type and it is further divided into the following five categories, depending on the kind of vehicles you are hoping to sell.

Independent Motor Vehicle

  • A license to sell, buy, or exchange used cars, motor homes, trucks, and neighborhood vehicles

Independent Motorcycle

  • A license to buy, sell, or exchange used ATVs, motor scooters, or motorcycles

Travel Trailer

  • A license to buy, sell, or exchange used travel trailers

Trailer / Semitrailer

  • A license to sell, buy, or exchange new or used utility trailers and/or semi-trailers

Wholesale Dealers

  • A license to sell or exchange vehicles only with other licensed dealers
  • Cannot sell to retail purchasers
  • Can buy, sell, or exchange used vehicles, including motor vehicles, motorcycles, and travel trailers
  • Can also buy, sell, or exchange new or used trailers and/or semi-trailers

Independent Mobility Motor Vehicle

  • A license to sell new mobility motor vehicles equipped and designed to transport people with disabilities

Note that each license is specifically to that vehicle type. If you need to sell more than one vehicle type, you would need all the licenses related to the specific vehicle type. 

Step 1: Determine the type of motor vehicle dealer license you need 

As listed above, there are four different types of dealer license and you need to decide what license you are applying for based on the type of vehicles you are planning to sell. 

Step 2: Complete a 6 Hour Pre-Licensing Training Course

A 6 Hour Pre-Licensing Training Course is required for independent (GDN) dealers who buy, sell or trade used cars, trucks, motor homes, neighborhood vehicles, off-road vehicles (ROV), all-terrain vehicles (ATV), and utility vehicles (UTV).

The course has to be approved by the Texas Department of Motor Vehicles. The licensing course covers topics such as the following:

  • The business and operations of motor vehicle dealers
  • Titles, Records, and Special Inventory Tax
  • Federal Regulations, Advertising, Texas Department of Motor Vehicle Enforcement 

Independent motorcycle dealers, independent travel trailer dealers, independent mobility motor vehicle dealers, utility trailer/semi-trailer dealers, wholesale dealers, wholesale auction dealers, salvage dealers, or franchised license dealers are not required to take the course

This course is entirely online through learning management systems, and completed, you will be awarded a Certificate of Completion. You will need a copy of this Certificate to submit with your license application. Here some somethings to note about the certificate: 

Step 3: Determine Your Business Corporate Structure 

There are many options for your business: Limited Liability Company (LLC), S Corporations, and Sole Proprietorships. We list the pros and cons of each below: 

Limited Liability Corp (LLC)

  • Pros: Maximum amount of flexibility in business operations
  • Cons: A lot of filings and fees to stay compliance and cost of insurance tends to be higher

S Corporation

  • Pros: Better for smaller corporations with a max of 100 shareholders
  • Cons: More admin and rules than LLC

Sole Proprietorship

  • Pros: Easiest to get started, meant for solo business owners
  • Cons: Lack of legal distinction between the individual and the business. The owner is the business

Here is a link with more information on each business type.

Step 4: Set Up Your Business Corporate Structure and Complete the Required Documents  

There are various documents that you will need to complete based on the type of business you decide to register. 


  • Articles of Organization
  • Operating Agreement

S Corporation

  • Articles of Incorporation
  • Corporate Charter and bylaws
  • Corporate meeting minutes showing the election of corporate directors 

Sole Proprietorship

  • DBA filing with the Secretary of State

Step 5: Obtain Federal Employer Identification number (EIN)

If your business is anything other than sole proprietorship or partnership, you would need to apply for a Federal Employer Identification Number. A federal EIN is an unique nine-digit tax identification number assigned by the Internal Revenue Service (IRS) to identify businesses operating in the United States. It is used for a variety of purposes, including filing federal tax returns, opening business bank accounts, paying payroll taxes, applying for business licenses, etc. 

You can apply for a federal employer identification number on the official IRS website. The application can be completed within one session and a Federal EIN number will be provided to the applicant upon completion. 

If your business is a sole proprietorship or partnership, you can submit the following identification in place of a federal EIN: A state driver’s license/person ID or a valid US passport. 

Step 6: Register with the Texas Secretary of State or County

The Texas Secretary of State website is primarily responsible for administering state elections and recording all business entities operating in the state. On the SOSDirect website, you can file business formation documents, receive filing evidence, search for business entities, and obtain entity status. 

  • To register your business name the Texas Secretary of State, you can simply create a login on the login page and then follow the instructions on the website to register your business
  • The type of documents and payments needed varies depending on the business structure, i.e., corporation vs LLC
  • After you have successfully registered your business with Texas Secretary of State, you should receive a Texas Certificate of Existence, certifying your business exists in the SOS’ database
Example certificate of existence

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Step 7: Find a Dealership Location and Display Lot

The dealership location is where all primary dealer business is performed. Here are some notes about its requirements:

  • Need a physical location for your dealer location
  • This location needs to meet all local zoning requirements 
  • Most cities and urban zoning would not allow you to set up your dealer in a residential area. However, if your dealership is in a rural area or an area with no zoning, you may be able to set up your dealer in a residential property. The property needs to be in a separate structure than the residential area
  • To comply with requirements, your office must be furnished with a desk, two chairs, a file cabinet to store dealer license records, and a computer equipped with internet access to print necessary paperwork. You also need to have a working landline phone (that is not a cellular phone). 
  • All of your Texas dealer license records are required to be stored in your business building
  • If you share your location with another business, each dealer must have their own office area. One business building can house a maximum of four retail dealers or eight wholesale dealers. It is mandatory for retail dealers and wholesale dealers to operate from separate dealer buildings; they can’t share the same building

The display lot is a location to showcase the vehicles you are selling. It should meet the following requirements: 

  • The display lot should have room to show at least 5 vehicles of your inventory
  • If you share location with another dealer, you must keep your inventory separate from another and each is still required to have a lot for 5 display spaces
  • You can have a storage lot at a separate location but you can’t sell vehicles on your storage lot. All sales should happen on your display lot 
  • The display lot must have lights after sunset 

Step 8: Install a sign

One other requirement is that the office needs to have a permanent sign mounted on a pole in the display area or attached to the building. The sign must display the name of the dealership with “six inches high or large” and it must be clearly visible to the public. Lastly, the hour of operations must be displayed prominently on the sign as well.

Step 9: Obtain a Texas Auto Dealer Bond

An auto dealer bond is a financial guarantee made by the surety (insurance company) toward the obligee (Texas Department of Motor Vehicles) that the principal (auto dealer) won’t violate rules and regulations governing the auto dealer industry.

In terms of bond amounts, most Texas dealers need a two-year term $50,000 auto dealer bond, which costs around $350 per year if you have a good credit. However, if your credit is below 650, the bond could be much more expensive. Franchised dealers, travel trailer dealers and utility/semi trailers dealers don’t need this bond.

To get a dealer bond, generally you need to provide basic information such as business name, owner name, address as well as social security number for a soft credit check.

If you don’t want to get an auto dealer bond, you can also apply for an irrevocable letter of credit prescribed by Section 320.27(10), F.S., in the amount of $25,000. This letter of credit must be from a bank authorized to do business in Texas. An irrevocable letter of credit is essentially a promise by the bank of the applicant to pay Texas Department of Motor Vehicles under certain conditions (i.e. if the dealer applicant broke the law). 

Step 10: Submit Application Through eLicensing 

You need to complete the correct auto dealer application from TxDMV. You need to submit your dealer license application on the official Texas DMV site

If you have questions, you may call Texas DMV at 888-368-4689.

Although most dealers typically apply for either a franchise or independent license, it is essential to review all available license types to ensure that you apply for the correct license type. Keep in mind that if you want to sell various types of vehicles, you will need to apply for each GDN for that vehicle type separately.

In your eLicensing application, you may need to submit some or all of the following: 

  • Applicant contact information
  • Business legal document, such as Article of Incorporation, where applicable
  • Photography of the business office, business sign and the display lot  
  • Fictitious name certificate if using a DBA
  • Certificate of Completion for the 6 Hour Licensing Course
  • Federal Employer Identification Number (Federal EIN)
  • Government photo IDs of all individuals listed on the license
  • $50,000 Texas Motor Vehicle Dealer Surety Bond
  • Payment of $700 fee per independent GDP licensee and $90 fee for every additional dealer license plate 
  • You will also need a copy of your lease or proof of property ownership.

Step 11: Complete electronic fingerprinting 

Each individual on the license needs to attend the fingerprinting appointment to check for any criminal record. Please don’t schedule any appointment until receiving the instruction to do so. More details can be found on the official Texas DMV fingerprinting requirement page.

After the appointment, the applicant will get a receipt. The purpose of the fingerprinting is to determine if you have been found guilty of a felony. If you have been found guilty, then the Texas DMV will require an explanation. In such circumstances, we highly recommend you consult a professional attorney to maximize your chances of approval.

Step 12: Receive Your Approved Application 

Once Texas DMV approves your application, the DMV will mail your license at the address you provided in your application. Now, you are a licensed motor vehicle dealer and go open a bottle of champagne to celebrate! 

Step 13: Maintain Business Hours 

For a retail Texas dealer, the minimum operational requirement is to be open for at least four consecutive hours per day, four days a week. On the other hand, a wholesale dealer must be operational for at least two consecutive hours per day, for at least two days per week.

Due to the Texas Blue Laws, motor vehicle dealers can’t sell vehicles on both Saturday and Sunday. They can choose to be operational on either day, but not both. However, dealers of travel trailers and trailer/semi trailers are allowed to operate all seven days of the week. 

Step 14: Maintain Vehicle Records

It is mandatory to maintain records of all vehicles bought, leased, and sold for a minimum of 48 months. It is advisable to make copies of all the documents related to these transactions. 


How much time does it take to get a dealer license? 

It could take 8-9 weeks for you to obtain your Texas dealer license after the Texas DMV received your application. In the case your application is incomplete, the state will send you a letter requesting the missing information. This process will delay the approval time. Therefore, you want to make sure that your application is complete before initial submission to prevent unnecessary delay

How to find a location for a dealership? 

It is easier to get a DMV approved location. If you can’t find it, you will need to search through craigslist and find a location zoned for a used car dealership. You can get a warehouse location with a small office setup. A real estate agent can also help you with your search.

Do I need to renew my license every year?

No, Texas Independent Dealer License expires every two years. 

To ensure timely renewal of your license, it is recommended to apply no later than 45 days before the expiration date, including the renewal of your bond. You will typically receive an email in advance alerting you the renewal date. 

How much does it cost to get a license? 

Texas Pre-Licensing Training: $150

Each General Distinguishing Number costs $700. 

The fee for each Texas dealer license plate is $90. 

Registration with Secretary of State: $300

Auto Dealer Bond: $300

Electronic Fingerprinting: $50

Signage cost: $100

Total: $1,790

Who Does Not Need a License to Sell Vehicles in Texas? 

You do not need a license to sell cars in Texas if: 

  • You only sell less than five cars per year that are registered solely in your name.
  • You’re selling an antique car/truck over 25 years old; or
  • You’re selling a special interest vehicle.

Where can I buy a Texas Auto Dealer Bond? 

You can buy it from a surety broker like us. Because surety is such a nuanced industry, not many surety companies can underwrite all bonds effectively. Therefore it's important to go through a broker that knows which surety company can offer the lowest rates based on your personal profile.