Can an Independent Auto Dealer Accept a Motorcycle or Trailer As a Trade?

The TIADA Compliance Consultation Service received a call from a dealer who asked about motorcycles. Specifically, the dealer asked if an independent auto dealer can accept a motorcycle as a trade.

The short answer is yes. A dealer may take into account the fair market value of a motorcycle and apply the same to a retail installment contract. The same is true for trailers. However, a dealer may not sell the motorcycle or trailer to a retail customer unless that dealer has a separate GDN that entitles that dealer to sell motorcycles or trailers.

What TxDMV Requires

Chapter 3.2.a of the TxDMV Motor Vehicle Dealer Manual says, "if a dealer wants to sell both used motorcycles and used automobiles, that dealer must hold two licenses, a Motorcycle GDN and a Motor Vehicle GDN." A separate bond is required for each type of GDN. This is also addressed in Chapter 3.6 of the Manual.

Should a dealer receive a motorcycle or trailer as a trade, and the dealer is only licensed to sell automobiles, the DMV has provided two recommended options: (1) the dealer can title the vehicle in her/his name and pay the appropriate taxes, keeping the vehicle for personal use; or (2) the dealer may sell the motorcycle or trailer wholesale to a dealer who is licensed to sell them. Under no circumstances should the dealer retail the motorcycle or trailer! Even with the recommended options for disposing of a motorcycle or trailer received on trade, TxDMV does not approve. TxDMV will investigate any complaint filed against a dealer for retailing a vehicle for which the dealer does not have a license.
To keep DMV from coming to visit you, the association recommends that you avoid taking in vehicles on trade for which you do not have a license to sell. Alternatively, feel free to apply for a GDN for multiple vehicles.

For more information on motorcycle sales, contact the Texas Motorcycle Dealers Association at 512-479-0425.


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