How to Be a Texas Car Dealer


Thinking of becoming an independent dealer in Texas? You came to the right place! Our prep course, “How To Become An Independent Auto Dealer,” was specifically designed with you in mind.

Future Dealer Questions:

Do I need a license?

If you are at all serious about the business, then YES. An individual is allowed to sell up to four vehicles per year without a dealer’s license – kind of tough to make any money that way, huh? Plus, every one of those vehicles has to be titled in YOUR name before you sell it. Why does that matter? Because that means you will be paying 6.25% in sales tax on each vehicle you buy – BEFORE you sell it! Licensed dealers do NOT pay sales tax on vehicles they acquire for their inventory.

So, what do I need to get my license?

On the most basic level, you’ll need a physical location for your dealership that meets the state’s premises requirements, and a dealer surety bond in the amount of $25,000. Dealer licenses are $700 + dealer plates and are issued for two year terms.
Application materials are available in this area of the TxDMV website.

There’s got to be more to it than that, right?

Oh yes, most definitely. A LOT more. That’s why we built the course, “How To Become An Independent Auto Dealer.”

I heard I could just sell under another dealer’s license instead of getting my own...true?

Well, you could...however, it is illegal, and could result in civil proceedings being brought against you by TxDMV, the OCCC or both. Maybe worse, either agency could then oppose you ever getting your legitimate license. So DON’T DO IT.

I just want to sell cars online, I don’t want to mess with getting a location or license...how can I do that?

You can’t. Under Texas law, you are required to have a licensed location to sell vehicles. If you don’t, law enforcement can (and will) seize your vehicles, impound them and not release them without proof of ownership in YOUR name on the front of the title. So get your license, join TIADA and get on the good guys’ team!

Who do I use for insurance, dealership management software, service contracts, floorplanning...and everything else?

Great questions. TIADA does not endorse any specific providers, but TIADA members can search our Membership Directory in each category to see what companies are also members. It's one of the perks of membership. You should also have a look at our Business Partners.

Can I be a TIADA member?

Sure! But the association is focused on licensed dealers. You can join today and once you get your P number, we will be glad to add it to our system. 

How to Become a Car Dealer in Texas

Are you interested in the automotive business, or currently work for a car dealer, and want to become an independent dealer with your own car business?  The list below contains a step by step guide on how to become a used car dealer in Texas.  You can also find an online course to help explain everything you need to know at https://www.howtobeatexascardealer.org/
 
Texas Automobile Dealer License: A Guide to all the steps necessary to obtaining your Texas dealers licenseAuto dealer licenses are handled by the Texas Department of Motor Vehicleshttps://www.txdmv.gov/

GDN License: Authorizes you to buy/sell any type of used motor vehicle other than motorcycles, utility trailers and semi-trailers.
 
Set Up Your Business: Before applying for your license, you need to legally form your company and provide a certification of incorporation, organization, or partnership. If your company is a corporation, limited partnership, limited liability partnership or limited liability company, you must submit a copy of your approved certificate of formation or certificate of authority issued by the Texas Secretary of State. If you are a franchise dealer, you must also obtain a franchise license.

Establish a permanent business location: Your business must be located in a building which has connecting exterior walls on all sides; compliant with all applicable local zoning ordinances and deed restrictions; not be located within a residence; have a valid mailing address; an office with a desk, two chairs, internet access and a working telephone listed under which the dealer does business; a clearly visible, permanent sign with letters at least six inches in height showing the business' name; an illuminated on-site display area with enough space for five vehicles; a location owned or leased by the dealer; be open at least four days per week and for at least four consecutive hours. The hours must be posted at the main entrance; the telephone must answered by an employee or answering service, and you must display your dealer license.
 
Obtain Your Auto Dealer Bond; The cost of an auto dealer bond varies depending on your financial strength, e.g. personal credit. All dealers must purchase a bond to get licensed. Your bond must be valid for the full two-year license period. The Bond Amount Required is $25,000.
 
Your application and fees: Should contain the following: proof of identity; photocopy of a current driver's license; assumed name certificates if operating under an assumed name; a map of your location; show documentation that the business meets the requirements of Occupations Code §2301.476 and 43 TAC §215.113; contact the Texas Department of Motor Vehicles for more details; and an application for eTAGS, included in the application packet. Fees are $350 license, $700 General Distinguishing Number License; and $90 for each dealer license plate
 
Submit Your Dealer License Application
e-mail to MVD-scancenter@TxDMV.gov or mail the completed application forms to:
Texas Department of Motor Vehicles
Motor Vehicle Division
P.O. Box 26487
Austin, TX 78755
(512) 465-5634