Texas has started to usurp California as the place to be for new opportunities, with people leaving their homes from all over the country to move there and make a new start. As the addage goes, everything’s bigger in Texas, and that includes an appetite for cars.
To meet that demand, the state always needs good car dealers and other vehicle dealers who can provide reliable places where Texans can acquire great-quality motors for the right price.
Texas laws passed back in 2019 --- Senate Bill 604 to be precise --- require that the majority of people who are applying for a Texas car dealer license will have to first attend and complete a 6-hour long web-based training course. This forms the first step of anyone’s journey to getting their Texas dealer license and starting a new life as a car dealer.
Below, we look in more detail at this training course and all the other requirements that the Lone Star State puts forward to anyone hoping to become a car dealer.
What is a Texas Car Dealer License?
The Texas car dealer license is a license issued and regulated by the Texas Department of Motor Vehicles for which all those hoping to acquire and sell cars for profit as a dealer would need to get to practice legally in the state of Texas.
Here we deal with a basic kind of dealer license known as a GDN (General Distinguishing Number). These are licenses issued to individuals who wish to go into business buying and selling cars in Texas, and differs somewhat from the larger more corporate licenses that franchised dealerships might get.
Since we’re looking at how individuals get this license, we will stick with GDNs. In all, there are 6 categories of GDN, which the applicant must specify when they submit a formal application for a GDN license. It should be noted that these GDN licenses only entitle the holders to buy and sell used vehicles, but some new items are permitted (not cars, trucks, etc.) These types are:
- Independent Motor Vehicle --- General buying and selling of used cars, trucks and motorhomes. Can also buy, repair and resell salvage vehicles.
- Independent Motorcycle --- Buying and selling of used motorcycles, scooters or ATVs.
- Travel Trailer --- Buying or selling used travel trailers, including salvage models.
- Trailer/Semitrailer --- Buying or selling new or used utility trailers or semitrailers
- Wholesale --- buying or selling vehicles with licensed dealers; cannot sell to retail customers.
- Independent Mobility Motor Vehicle Dealer License --- Dealers can sell mobility vehicles designed to transport people with disabilities.
Each application submitted by a hopeful Texas car dealer has to be for just one of these categories. However, the very ambitious dealers who want to get multiple licenses can do so by submitting multiple applications.
What Steps Are Required for a Texas Car Dealer License
There are 7 key steps to getting your Texas car dealer license, all of which we will cover in this section. Although the process can seem quite daunting at first, it is actually quite accessible and designed to merely help you do everything in the right way and set you up for success.
It’s not a process designed to try and trick you, nor is anyone on the other side of the process willing you to fail. Study the 7 steps and see how it’s done.
Step 1: Online Course
As we mentioned when we talked about Texas Senate Bill 604, there is now a requirement for all aspiring car dealers in Texas to take a 6-hour course to learn the important know-how, rules, regulations and more when it comes to selling cars, trucks, motor homes, neighborhood electric vehicles and more --- according to what kind of GDN you are applying to get.
The course cannot be done by proxy. It has to be completed by an owner or manager of the new business whose name appears on the Texas car dealer license application.
In essence, here’s what’s on the course:
- All related rules and guidelines
- Running a car dealership business
- How to comply with state and federal laws
The course isn’t even just for newcomers. There was also a rule that said that those who acquired their Texas dealer license for the first time after September 1, 2009 also had to take a shorter course of 3 hours to refresh their knowledge and bring them completely up to speed.
Whichever course you’re doing, successful completion will get you a certificate of completion which you will then have to upload when you prepare to submit your dealer license application. It should be noted that there’s no immediate rush to submit an application once the course is done. The point of the course is to allow you to see everything that’s involved in running a car dealership successfully in Texas.
If you discover, for instance, that there are aspects of it that you don’t fully understand, then you should take the time to rewatch the training materials and fill in any knowledge gaps before you move onto the application stage. As we said, each stage of the process is there to help you and the first one is about finding where your gaps in knowledge and understanding of the industry might be.
Step 2: Getting a Lot
The next stage is securing a place to do your business. You’ll need a location that is properly zoned and that has space for an office and other facilities you’ll need to run your car dealership. The office has to contain: a desk, 2 chairs, Internet access, and a working telephone line that’s installed in your dealership’s name. It can be a shared office space, but there must be a distinct zone that’s specifically for your dealership.
As to the property where the office and lot will be located, you either have to own it outright or have a lease on it that lasts as long as the validity period of your Texas car dealer license. That’s typically 2 years.
The display lot can be indoors or outdoors but needs to have enough space to show at least five of the vehicle types that you are selling. There’s also rules about the form and surface. It can be indoors or outdoors, but must have a solid surface (IE, not grass) and must not be just a driveway. Like the office building, the lot has to be correctly zoned for this kind of commercial use.
Step 3: Obtaining an EIN
The EIN is an Employer Identification Number and is a required step to take before you submit your final application for your GDN. The EIN is like an ID number for your business and its importance and relevance will become most apparent when it comes to tax season. The EIN can be applied for online and takes just a short time to complete. You’ll get the number instantly so there’s no waiting period.
Step 4: Register Your Company Name
Next comes a fun step - choosing a name for your business. You might already have it but whenever you do, you have to then register it with the Texas Secretary of State. Dealing with this step is covered in part of the 6-hour training course, so you will be furnished with all the necessary particulars during step 1.
Step 5: Obtain a Car Dealer Bond
The next thing you have to get is a very important one, namely your $50,000 dealer surety bond. To be clear, it doesn’t mean that you have to pay $50,000. The bond is a kind of binding contract in which you promise and guarantee that you will operate according to all relevant Texas laws and regulations.
If you don’t and your clients take action against you, they may be able to make claims against you, the money for which could come from this bond and then you will have to pay. An example of how one can apply for a Texas surety bond can be seen here .
Step 6: Application Submission
With all these hoops jumped through, it’s now time to finalize and submit your application to the Texas Department of Motor Vehicles. You can do this online through the eLicensing system . There is a lot to fill in but all has been covered in your step 1 course.
Make sure you refer back to those course materials if you find that there’s any part of the application you don’t understand. If you fill it in wrongly and then submit, you’ll only get worse delays down the line. Better to take the time you need to ensure that the application is completed fully and correctly.
Step 7: Keep Up with Business Hours and Records
Retail businesses in Texas are required to open at least 4 days a week and for at least 4 consecutive hours a day. If it’s a wholesaler GDN you’re getting, then the requirements are two days a week and two hours a day.
There’s also rules on weekends, for instance a dealership can be open on both Saturday and Sunday, but can only sell cars on one of those days. As for record keeping, you need to keep careful track of every vehicle bought and sold for at least 48 months. The best way to do that is just copy every bit of documentation and store it securely.
And with these steps completed, you can be the proud holder of a Texas car dealer license.