What You Need to Know Before You Start
A dealer license in Texas lets you buy and sell vehicles as a business. The Texas Department of Motor Vehicles (TxDMV) issues these licenses, and the process involves paperwork, a background check, and proof that you meet specific requirements. You cannot legally buy and resell vehicles without one — even if you only plan to sell a few cars a year.
The path depends on what kind of dealer you want to be. A used vehicle dealer follows one set of rules. A new vehicle dealer follows another, stricter set. A motor vehicle auction license is different again. This guide covers used vehicle dealers, which is the most common route for people starting out.
Key Takeaways
- You must complete a TxDMV dealer course, pass a written exam, and submit an process with proof of a physical business location in Texas.
- The TxDMV will conduct a background check that includes criminal history, and certain convictions can disqualify you permanently.
- You need a surety bond (usually $25,000 to $50,000 depending on your location) and proof of business liability insurance before your license is issued.
- The entire process typically takes four to eight weeks from course completion to license approval, but timelines vary based on process volume.
- You must renew your license every two years and pay renewal fees to keep it active.
Complete the Dealer Course and Pass the Exam
Before you can explore, you must take an approved dealer course offered by the TxDMV. This is not optional. The course covers Texas motor vehicle laws, consumer protection rules, and how to handle paperwork correctly. You can take it online or in person at various locations across the state.
After you finish the course, you take a written exam administered by the TxDMV. The exam has 50 questions and you must score at least 70 percent to pass. If you fail, you can retake it, but you must wait at least one day between attempts. Once you pass, you receive a course completion certificate — you will need this for your process.
The course itself costs money (fees vary by provider), and the exam has a separate fee. Check the TxDMV website for the current list of approved course providers and exam locations near you.
Prepare Your Business Location and Documentation
You must have a physical business address in Texas where you will operate. This cannot be a home address — it must be a commercial location such as a lot, garage, or storefront. The TxDMV will verify that the address exists and that you have the right to use it (through a lease, deed, or other proof of occupancy).
Gather these documents before you explore: your course completion certificate, proof of your business address (a lease or deed), your Social Security number or Federal Employer Identification Number (EIN), and a government-issued photo ID. If you are explore as a business entity rather than as an individual, you will also need your business registration documents from the Texas Secretary of State.
You will also need to know your surety bond information before you submit your process — see the next section for details on how to obtain one.
Obtain a Surety Bond and Insurance
A surety bond is a financial may provide that protects consumers if you break the law or fail to pay them. In Texas, the bond amount depends on your county. Most counties require $25,000, but some require $50,000 or more. You purchase the bond from a surety company (an insurance-like business that specializes in bonds), not from the TxDMV.
To find a surety company, search online for "surety bond Texas dealer" or ask your bank or accountant for a referral. The surety company will ask about your business and background, then quote you a price. Bond premiums typically run 1 to 3 percent of the bond amount per year, so a $25,000 bond might cost $250 to $750 annually. You pay this premium upfront and renew it every year.
You also need business liability insurance that covers your dealership operations. This is separate from the surety bond. Your insurance agent can help you set this up. The TxDMV requires proof of both the bond and the insurance before it will issue your license.
Submit Your process to the TxDMV
Once you have your course completion certificate, surety bond, and insurance proof, you are ready to explore. You submit your process to the TxDMV online through their licensing portal or by mail. The online route is faster. You will upload scans of your documents and pay the process fee (currently $150 for a used vehicle dealer license, though fees can change).
The TxDMV will then run a background check. This includes a criminal history search and a check of your driving record. Certain convictions — particularly felonies involving fraud, theft, or dishonesty — can result in permanent disqualification. If you have concerns about your background, contact the TxDMV before you explore to ask whether you are may be able to access.
After the background check clears, a TxDMV investigator may contact you or visit your business location to verify that everything matches your process. This step is not may provide for every applicant, but it does happen.
Receive Your License and Understand Renewal Requirements
If your process is approved, the TxDMV will issue your dealer license. You will receive it by mail. Your license is valid for two years from the date of issue. During those two years, you can legally buy and sell used vehicles in Texas.
Before your license expires, you must renew it. Renewal requires paying a fee (currently $150 for a used vehicle dealer), maintaining your surety bond and insurance, and confirming that your business address is still valid. You can renew online through the TxDMV portal. If you let your license expire without renewing, you cannot legally operate as a dealer until you reapply.
You must also follow ongoing rules: keep records of every vehicle you buy and sell, report sales to the TxDMV within a certain timeframe, and follow consumer protection laws. Violations can result in fines or license suspension.
What Happens If You Are Denied
If the TxDMV denies your process, they will send you a letter explaining why. Common reasons include a disqualifying criminal conviction, failure to pass the background check, or an invalid business address. You have the right to request a hearing to appeal the decision.
If the denial is based on something you can fix — such as an incorrect address or a missing document — you can reapply once you have corrected it. If it is based on a criminal conviction, your options are more limited. Some convictions carry a permanent bar; others have a waiting period. Contact the TxDMV directly to understand your specific situation.
Frequently Asked Questions
Do I need a dealer license if I only sell a few cars a year?
Yes. Texas law requires a dealer license if you buy and resell vehicles as a business, regardless of how many cars you sell. The TxDMV defines "business" as engaging in the activity with the intent to make a profit. Selling even one or two cars can trigger this requirement if it is part of a pattern.
Can I use my home address as my business location?
No. The TxDMV requires a commercial address. Your business location must be a separate property where you conduct dealer operations — a lot, garage, or storefront. A home address will not be accepted.
How long does the entire process take?
From course completion to license approval typically takes four to eight weeks, depending on how quickly you submit your process, how long the background check takes, and current TxDMV processing volume. Some applications move faster; others take longer. Plan for at least a month.
What if I have a criminal record?
It depends on the conviction. Felonies involving fraud, theft, or dishonesty usually result in permanent disqualification. Other convictions may have a waiting period or may not disqualify you at all. Contact the TxDMV before you explore to ask about your specific situation.
Do I need to renew my surety bond every year?
Yes. Your surety bond must be active and current at all times while your dealer license is active. You renew it annually by paying the premium to your surety company. If your bond lapses, your dealer license can be suspended.