Motorcycles on Trade-In?
The TIADA Compliance Consultation Service received a call from a dealer who asked about motorcycles. Specifically, can an independent auto dealer accept a motorcycle as a trade?
The 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. However, a dealer may not sell the motorcycle to a retail customer unless that dealer has a separate GDN that entitles him/her to sell motorcycles.
Chapter 3.2.a of the TxDMV Motor Vehicle Dealer Manual says, "For example, 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 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 wholesale to a licensed motorcycle dealer. Under no circumstances should the dealer retail the motorcycle! Even with the recommended options for disposing of a motorcycle received on trade, DMV does not approve. DMV 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, 512-479-0425.
Editor's note: This blog has been updated to clarify the circumstances under which a dealer may sell a motorcycle taken on trade with feedback from the Texas Department of Motor Vehicles.