Texas requires the $50,000 bond to protect consumers and uphold standards across the used car industry. When a dealer violates legal obligations—such as failing to transfer a vehicle title—the bond provides financial compensation to affected consumers. Without the bond, the state cannot guarantee recourse for consumers harmed by unethical practices. In addition, a dealership without an active bond risks license suspension, penalties, and operational shutdown.
Parties Involved
A Texas Used Motor Vehicle Dealer bond is a binding agreement among three parties: the dealer (Principal), the Texas Department of Motor Vehicles (Obligee), and the Surety.
Who Needs a Texas Used Motor Vehicle Dealer Bond
Dealers of used vehicles, motorcycles, recreational vehicles, or wholesale fleets must obtain this bond to operate legally in Texas. The bond is also one of the requirements a dealer must provide to the Texas DMV in order to obtain a
General Distinguishing Number (GDN).
How to Obtain a Texas Used Motor Vehicle Dealer Bond
Speak with your local insurance agent and complete the required application. Once the application is reviewed and if the principal qualifies, the surety provides a quote. After payment of the bond premium, the bond is issued and sent to the applicant for filing with the TxDMV. Dealers must renew the bond every two years, aligned with the license term. If a dealer manages operations in different counties, separate bonds may be required for each location.
How Much Does a Texas Used Motor Vehicle Dealer Bond Cost
At Avla US Insurance Company, the bond premium is determined based on the average credit scores of all owners. The premium for the 2-year term ranges from $350 to $1,313.
Who can file a claim against the bond
In order for a dealer’s customer to file a claim against the bond, they must first obtain a judgment against the dealer. If a claim is filed, deemed valid and the surety settles with the claimant, the dealer must reimburse the surety for the amount paid out, including any attorney fees. Unlike insurance, this bond does not protect the dealer.
