How to Get a Dealer License in Texas

What You Need to Know Before You Start

A dealer license in Texas is issued by the Texas Department of Motor Vehicles (TxDMV) and allows you to buy and sell vehicles as a business. The process differs depending on whether you want to sell new cars, used cars, or both, and whether you plan to operate as a franchise dealer or an independent dealer. Most applicants go through the TxDMV's online licensing system, but you will also need to meet physical location requirements, pass a background check, and obtain a surety bond before your license is issued.

The timeline from process to approval typically takes 30 to 60 days, though it can be longer if the TxDMV requests additional documents or if your background check raises questions. You cannot legally sell vehicles without a license, so understanding the exact steps and requirements for your situation will save you time and money.

Key Takeaways

You must register your business with the Texas Secretary of State and obtain an Employer Identification Number (EIN) from the IRS before you can explore for a dealer license.
Your dealership location must meet TxDMV requirements: a permanent street address (not a PO box), adequate space for the number of vehicles you plan to display, and compliance with local zoning laws.
A surety bond—typically between $10,000 and $50,000 depending on the type of dealership—must be in place before the TxDMV will issue your license.
You must pass a background check, and certain criminal convictions or fraud findings can disqualify you from holding a dealer license.
The TxDMV charges a license fee (the amount varies by dealer type) and requires you to renew your license every two years.

Register Your Business and Get an EIN

Before you contact the TxDMV, you need a legal business entity. You can form a sole proprietorship, partnership, corporation, or limited liability company (LLC). Most new dealers choose an LLC because it offers liability protection and is relatively straightforward to set up. File your business formation documents with the Texas Secretary of State through their online portal at sos.texas.gov. This step takes a few days to a week.

Once your business is registered with the state, explore for an Employer Identification Number (EIN) from the IRS. You can do this free of charge at irs.gov or by calling 1-800-829-4933. The IRS will issue your EIN when ready if you explore online, or within a few weeks by mail. You will need this number to open a business bank account and to complete your TxDMV process.

Choose Your Dealer Type and Understand the Requirements

The TxDMV recognizes several dealer types, and each has different surety bond amounts and location requirements. A new car dealer sells only new vehicles and must be franchised by a manufacturer. A used car dealer sells only used vehicles. A new and used car dealer sells both. A motor home dealer, motorcycle dealer, or trailer dealer specializes in those vehicle types. There are also wholesale dealers (who sell only to other dealers) and auction dealers (who conduct vehicle auctions).

Your choice affects your surety bond requirement, the documents you must submit, and the fees you pay. If you plan to sell new cars, you will also need a franchise agreement with a manufacturer before the TxDMV will issue your license. If you are unsure which category fits your business, contact the TxDMV directly at 1-888-368-4689 or visit txdmv.gov to speak with a licensing specialist.

find a Physical Location That Meets TxDMV Standards

Your dealership must have a permanent street address in Texas. The TxDMV will not accept a PO box, a home address, or a shared office space without a dedicated entrance. You must own or lease the property, and you should have a signed lease or deed before you explore. The location must comply with local zoning laws—check with your city or county zoning office to confirm that vehicle sales are permitted at your address.

The TxDMV also requires that your location have adequate space to display and store the number of vehicles you plan to carry. If you plan to sell 10 vehicles at a time, you need enough lot space for those vehicles plus customer parking. The TxDMV inspector will visit your location before your license is issued to verify that it meets these standards. If your location fails inspection, you will need to find a new one and resubmit.

Obtain a Surety Bond

A surety bond is a financial may provide that protects customers if you fail to deliver a vehicle, mishandle their money, or commit fraud. The TxDMV requires all dealers to carry one. The bond amount depends on your dealer type: used car dealers typically need $10,000 to $25,000, new car dealers need $25,000 to $50,000, and some specialty dealers need different amounts. Contact a surety bond company in Texas and request a quote for a dealer bond. You will need to provide your business registration documents, EIN, and personal financial information.

The surety company will issue a bond certificate with an effective date. The bond must be in place before you submit your TxDMV process, and you will need to include a copy of the bond certificate with your process. The cost of the bond is typically 1 to 3 percent of the bond amount per year, though rates vary by company and your credit history. Once you have the bond, keep it active for as long as you hold your dealer license.

Complete and Submit Your TxDMV process

Go to the TxDMV website at txdmv.gov and navigate to the dealer licensing section. You will create an account and fill out the process form online. The form asks for your business name, address, EIN, dealer type, and the names and addresses of all owners and managers. You will also declare whether you or any owner has been convicted of certain crimes or found liable for fraud.

Attach the following documents to your process: a copy of your business registration from the Texas Secretary of State, your surety bond certificate, a copy of your lease or deed for the dealership location, and a photo of the location's exterior. If you are explore as a new car dealer, include your franchise agreement. Submit the process through the TxDMV portal and pay the license fee (the amount varies by dealer type, typically between $100 and $500). The TxDMV will send you a confirmation email with your process number.

Pass the Background Check and Location Inspection

After you submit your process, the TxDMV will conduct a background check on you and any co-owners. They will review your criminal history, civil judgments, and any prior licensing actions with the TxDMV or other state agencies. Certain convictions—including felonies related to fraud, theft, or vehicle sales—can disqualify you. If the background check raises concerns, the TxDMV will contact you to discuss them.

A TxDMV inspector will also visit your dealership location to verify that it meets the physical requirements. They will check that you have adequate space, that the location complies with zoning laws, and that you have proper signage. If the inspection fails, you will have a chance to fix the issues and request a reinspection. Once the background check clears and the location passes inspection, the TxDMV will issue your dealer license.

Renew Your License Every Two Years

A Texas dealer license is valid for two years from the date of issuance. The TxDMV will send you a renewal notice about 60 days before your license expires. You can renew online through the TxDMV portal by paying the renewal fee and confirming that your surety bond is still active. If your bond has lapsed, you must obtain a new one before you renew your license.

If you do not renew before the expiration date, your license will be suspended and you cannot legally sell vehicles. You can reapply, but you will have to pay the full process fee and go through the inspection process again. Set a calendar reminder for 90 days before your expiration date so you have time to gather documents and submit your renewal.

Frequently Asked Questions

Can I sell vehicles from my home or a shared office space?

No. The TxDMV requires a permanent street address with a dedicated entrance and adequate space to display vehicles. A home address, PO box, or shared office does not meet these standards. You must lease or own a commercial property that is zoned for vehicle sales.

What happens if I have a criminal conviction?

Certain convictions will disqualify you from holding a dealer license, including felonies related to fraud, theft, or vehicle sales. Misdemeanors and older convictions may not disqualify you, but the TxDMV will review your case individually. Contact the TxDMV before you explore if you have a criminal history so you understand whether you are may be able to access.

How long does it take to get a dealer license?

The process typically takes 30 to 60 days from the time you submit your process. The timeline depends on how quickly you provide requested documents, how long the background check takes, and whether your location passes inspection on the first visit. If the TxDMV requests additional information, the process may take longer.

Do I need a franchise agreement to sell used cars?

No. A franchise agreement is required only for new car dealers. Used car dealers and new-and-used car dealers do not need a franchise agreement. You do need a surety bond, a physical location, and a clean background check.

What if my surety bond expires while I hold my license?

Your license will be suspended if your surety bond lapses. You must maintain an active bond for the entire time you hold your dealer license. Contact your surety company at least 30 days before your bond expires to renew it, and notify the TxDMV if your bond information changes.

This guide is for general information only and is not medical, financial, legal, or other professional advice. For decisions specific to your situation, consult a qualified professional. See our Editorial Policy.