Texas used car dealer license, bond and insurance: what you need

If you are opening or renewing a used car lot in Texas, you need three things lined up: a General Distinguishing Number (GDN) dealer license from the Texas Department of Motor Vehicles (TxDMV), a $50,000 motor vehicle dealer surety bond, and insurance that fits how your lot operates. Burch Insurance Group can quote the bond and the dealer insurance together so the names and dates match your application.

Do I need a GDN to sell used cars in Texas?

TxDMV's dealer manual says a person may sell fewer than five vehicles in a calendar year without a license only when the vehicles are titled and registered in that person's own name. If the vehicles are not in your name, you need a license to sell even one. A used car lot needs an Independent Motor Vehicle GDN, and TxDMV issues separate independent license types for motorcycles, travel trailers, trailers and wholesale dealers, one license type per application.

TxDMV dealer licenses are valid for two years from the date of issuance. Motor Vehicle GDN applicants must also submit a certificate of completion for the required licensing education course from a TxDMV-approved vendor. The course only needs to be completed once.

What does TxDMV require for the lot itself?

Check the location before you sign a lease. TxDMV's retail GDN checklist requires:

• A permanently mounted, weather-resistant business sign with letters at least six inches high. Banners do not count.
• An office of at least 100 square feet with ceilings at least seven feet high, in a permanent building and not in a residence or hotel.
• A display area large enough for at least five vehicles, reserved for your inventory.
• Posted business hours, open at least four days a week for at least four consecutive hours a day.
• Locked storage for license plates, such as a locked room or a steel cabinet.

You will submit photos of the sign, building, display area, office, plate storage and posted hours. TxDMV also says the lease should run for the full license term.

How does the Texas $50,000 dealer bond work?

TxDMV requires a $50,000 Motor Vehicle Dealer Surety Bond with new and renewal GDN applications, issued for a two-year term. Franchise dealers and travel trailer and utility trailer dealers are exempt. The $50,000 is the bond amount, not what you pay for it; the cost depends on the surety's review of you and your business.

A bond is not insurance for you. It protects people who deal with you under the bond terms, and the surety can seek repayment from you for a valid claim it pays. TxDMV notes that dealers are responsible for claims above $50,000. The bond does not cover your inventory against hail or theft and does not pay liability claims.

What insurance should a Texas used car lot carry?

The bond gets you licensed. Insurance protects the business. For most small Texas lots the conversation covers:

• Garage or dealer liability for injuries and damage arising from the lot and from test drives.
• Dealer physical damage (open lot) coverage for your own inventory. Ask how hail is handled. A lot in Dallas, Fort Worth or San Antonio can lose many cars in one storm, and the hail deductible and any per-vehicle limits matter.
• Garagekeepers coverage if you keep or repair customers' vehicles.
• Floor plan lender requirements, which often set limits and deductibles for inventory.

Tell us who drives dealer vehicles, whether you allow unaccompanied test drives, how you move cars, whether you do repair or detail work and your peak inventory value.

Fictional example: a Houston lot opening in spring

Take a fictional two-owner lot in Houston planning to open in April with up to 30 cars. The owners finish the TxDMV education course, sign a two-year lease on a lot that meets the premises checklist, and ask us for the bond and a dealer insurance quote at the same time. We match the legal entity name and address on the bond to the GDN application, quote liability and open lot coverage with a hail deductible they choose, and line up the effective dates with the license. This is an illustration, not a promise of a particular result.

Questions Texas dealers ask us

Is the $50,000 bond the same as my insurance? No. The bond is required for the GDN and protects others under its terms. Insurance protects your business and inventory.

How long is the Texas dealer bond? TxDMV requires the bond to be issued for two years, matching the two-year license.

Can I run a lot from my home? Not under TxDMV's retail premises rules, which do not allow the office to be in a residence.

Do I need to work with an agency in Texas? No. Burch Insurance Group is licensed in Texas and works with Texas dealers by phone and online.

What BIG needs to start

Send the legal business name, GDN license type, lot address, ownership details, target opening or renewal date, expected peak inventory value and a short description of your operations. Our used-car dealer insurance quote checklist lists the details that speed up a quote.

Request a dealer insurance quote, or call 612-712-6407.