How to Get a Dealer License in Texas

What you need to do to get a dealer license in Texas

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 requires you to register your business with the state, pass a background check, obtain a surety bond, and pass a written exam on motor vehicle laws. You will also need a physical location where you conduct business — you cannot operate as a dealer from a home address alone.

The entire process typically takes four to eight weeks from start to finish, depending on how quickly you gather documents and how long the TxDMV takes to process your process. Some steps can happen in parallel, which speeds things up.

Key Takeaways

You must register your business with the Texas Secretary of State and obtain an Employer Identification Number (EIN) from the IRS before explore for a dealer license.
The TxDMV requires a surety bond (usually $25,000 to $50,000 depending on the type of dealership) and a physical business location with a street address.
You will need to pass a background check and a written exam on Texas motor vehicle laws, which covers dealer responsibilities and consumer protections.
The process fee is $300 for a new dealer license, plus the cost of your surety bond, which varies by bonding company.

Register your business and get an EIN

Before you explore to the TxDMV, you must have a registered business entity. You can form a sole proprietorship, partnership, LLC, or corporation — the TxDMV does not require a specific structure. If you are operating under your own name as a sole proprietor, you still need to register a Doing Business As (DBA) name with your county clerk if you plan to use a business name other than your legal name.

Next, obtain an Employer Identification Number (EIN) from the Internal Revenue Service. You can explore for an EIN online at the IRS website (irs.gov) at no cost, and you will receive your number when ready. You will need your EIN when you explore for the dealer license. Even if you do not plan to hire employees, you need an EIN to operate as a business.

If you are forming an LLC or corporation, file your formation documents with the Texas Secretary of State. This typically costs $300 to $500 and takes one to two weeks. You can file online through the Secretary of State's website (sos.texas.gov).

Obtain a surety bond

The TxDMV requires all new dealers to post a surety bond before they can receive a license. A surety bond is a financial may provide that protects consumers if you fail to follow dealer laws or mishandle their money. The bond amount depends on the type of dealership you are opening: new vehicle dealers typically need a $50,000 bond, used vehicle dealers need $25,000, and some specialty dealers (motorcycles, trailers, etc.) may need different amounts.

You purchase a surety bond from a bonding company, not from the state. The cost is usually 1 to 3 percent of the bond amount per year, so a $25,000 bond might cost $250 to $750 annually. Shop around — different bonding companies charge different rates. You will need to provide the bonding company with your business registration documents, EIN, and personal financial information.

Once you have the bond, the bonding company will send a copy directly to the TxDMV. You do not submit it yourself. Keep a copy for your records.

find a physical business location

You must have a physical street address where you conduct dealer business. This cannot be a home address, a mailbox service, or a P.O. box. The address must be a real location where customers can visit and where you keep records. If you are leasing space, have a signed lease or letter from the property owner confirming you can use the space for a dealership.

The TxDMV will verify that your address is a legitimate business location. If you are unsure whether your location meets the requirement, contact the TxDMV directly before you explore. Some cities and counties have zoning restrictions on where dealerships can operate, so check with your local zoning office as well.

Complete the dealer license process

The TxDMV process for a dealer license is Form VTR-130 (process for Motor Vehicle Dealer License). You can read it from the TxDMV website (txdmv.gov) or request it by mail. The form asks for your business name, address, ownership structure, EIN, and details about the types of vehicles you plan to sell.

You will also need to provide proof of your surety bond, a copy of your business registration, and documentation of your physical location (such as a lease or utility bill showing your business address). Submit the completed form and all supporting documents to the TxDMV by mail or in person at a TxDMV office. The process fee is $300, which you pay when you submit the form.

The TxDMV will conduct a background check on you and any co-owners. This check looks for criminal history, fraud, and violations of motor vehicle laws. If you have a felony conviction or certain misdemeanors, you may be denied a license.

Pass the dealer exam

Once the TxDMV receives your process and completes the background check, you will be notified to schedule your written exam. The exam covers Texas motor vehicle dealer laws, consumer protection rules, and your responsibilities as a dealer. You must score at least 70 percent to pass.

The exam is administered at TxDMV offices across the state. You schedule your exam date online or by calling the TxDMV. The exam takes about two hours and covers topics like advertising rules, buyer's guides, odometer disclosure, and handling customer deposits. You can study using the TxDMV's dealer exam study guide, which is available on their website.

If you do not pass on your first attempt, you can retake the exam. There is no additional fee for retakes, but you must wait at least one business day before scheduling another exam.

Receive your license and set up dealer operations

After you pass the exam, the TxDMV will issue your dealer license. The license is valid for two years and must be renewed before it expires. You will receive your license by mail, and you must display it at your business location where customers can see it.

Once you have your license, you can legally buy and sell vehicles. You must follow all TxDMV rules, including providing buyers with a buyer's guide, disclosing the vehicle's history, and handling customer deposits properly. The TxDMV conducts inspections and audits of dealers, so keep detailed records of all sales and customer transactions.

You will also need to register with the Texas Workforce Commission for unemployment insurance and with the Texas Comptroller for sales tax purposes if you have not already done so. These are separate from the dealer license but are required to operate legally as a business in Texas.

Frequently Asked Questions

Can I get a dealer license if I have a criminal record?

It depends on the type and age of the conviction. Felonies and certain misdemeanors related to fraud, theft, or dishonesty will likely disqualify you. The TxDMV has discretion to deny or approve based on the specific offense. Contact the TxDMV before you explore if you have concerns about your background.

How much does it cost to get a dealer license in Texas?

The process fee is $300. The surety bond costs $250 to $750 per year depending on the bond amount and the bonding company. You may also have costs for business registration, an EIN, and a physical location. Total startup costs typically range from $1,000 to $2,000 before you sell your first vehicle.

Do I need a separate license for each type of vehicle I sell?

No. A single dealer license covers all types of vehicles — cars, trucks, motorcycles, trailers, and RVs. However, if you plan to sell new vehicles, your surety bond amount may be higher than if you sell only used vehicles. Check with the TxDMV about the specific bond requirement for your business plan.

How long is a dealer license valid?

A dealer license is valid for two years from the date of issue. You must renew it before it expires by submitting a renewal process and fee to the TxDMV. Renewal is usually simpler than the initial process and costs less.

What happens if I sell vehicles without a dealer license?

Selling vehicles without a license is illegal in Texas and can result in fines, criminal charges, and civil penalties. The TxDMV actively investigates unlicensed dealers, especially those operating online or at auctions. If you are caught, you may face fines up to $4,000 per violation and possible jail time.

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.