Texas is usurping California as the go-to place for new opportunities as people head to the Lone Star State for new opportunities. And as the adage goes, everything’s bigger in Texas, including an appetite for cars. To keep up with this demand, the state has an ongoing need for quality vehicle dealers that can provide that can offer Texans quality automobiles at the right price.
In 2019, Texas passed Senate Bill 604 which requires prospective car dealers to first complete a six-hour web-based training course. It’s the initial step for anyone seeking to take the journey to become a licensed Texas car dealer. Read on as we detail all the licensing requirements.
What is a Texas Car Dealer License?
A Texas car dealer license, which is issued and regulated by the Texas Department of Motor Vehicles, is mandatory for those hoping to acquire and sell cars for profit as a dealer in the state.
A kind of dealer license is a GDN (General Distinguishing Number). This is issued to individuals seeking to buy and sell cars in Texas; it differs somewhat from the license that a franchised dealership might get.
Since we’re looking at how an individual obtains a dealer license, we’ll focus on the GDN process. In all, there are six categories of GDN, which the applicant must specify when they submit a license application. It should be noted that these GDN licenses only entitle the holders to buy and sell used vehicles, but some new items are permitted as detailed below. These types are:
- Independent Motor Vehicle --- General buying and selling used cars, trucks, and motorhomes. This also covers the buying, repairing, and reselling of salvage vehicles.
- Independent Motorcycle --- Buying and selling used motorcycles, scooters, or ATVs.
- Travel Trailer --- Buying or selling used travel trailers, including salvage models.
- Trailer/Semitrailer --- Buying or selling of 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 covers just one of these categories. However, the ambitious prospective Texas dealer can submit multiple applications.
What Steps Are Required for a Texas Car Dealer License
This section covers the seven key steps to getting a Texas car dealer license. Although the process can seem daunting at first, the Texas Department of Motor Vehicles makes everything quite accessible. Everything is designed to help applicants correctly complete the procedure and be set up for success.
Step 1: Online Course
As mentioned earlier, aspiring Texas car dealers are required to take a six-hour online course to learn the state’s rules and regulations for selling cars, trucks, motor homes, neighborhood electric vehicles, and more. The course instruction varies based on the GDN type and must be completed by the applicant named on the license application. The course includes:
- All related rules and guidelines
- Running a car dealership business
- Complying with state and federal laws
The course isn’t just for newcomers. Dealers who were licensed after September 1, 2009, are required to take a three-hour refresher lesson.
Upon successful completion of the course, prospective dealers upload the completion certification as part of the application process. There’s no rush to submit the results, as applicants can go back through the course to review any knowledge gaps. .
Step 2: Finding a Business Location
The next stage involves securing a place for the business. You’ll need a location that is properly zoned and that has space for an office and other dealership facilities. The office has to contain: a desk, two chairs, Internet access, and a working telephone line that’s installed in the dealership’s name. The space can be a shared office, but there must be a distinct zone that’s specifically for the dealership.
The location must be owned or leased by the applicant. The length of the lease must at least cover the license validity period, which is typically two years. The display area may be indoors or outdoors but must have space for at least five vehicles There are also rules about the type of display zone. For example, the vehicles must rest on a solid surface, like purpose-built pavement (not just a driveway). Grass is not permitted, either. Local zoning must permit the presence of a vehicle lot.
Step 3: Obtaining an EIN
Obtaining an Employer Identification Number (EIN) is a required step to take before submitting the final GDN application. Think of it like as a social security number for the business. An EIN can be easily obtained through the Internal Revenue Service website. The process is simple and instantaneous.
Step 4: Register Your Company Name
Next comes the fun part, choosing a name for your business. Perhaps you’ve already done this, but you’ll need to register it with the Texas Secretary of State. Dealing with this step is covered in part of the six-hour training course, so all the details are covered in the first step.
Step 5: Obtain a Car Dealer Bond
Obtaining a $50,000 dealer surety bond is a vital step in the Texas dealer application process. To be clear, this doesn’t mean shelling out $50,000. A bond is a type of contract where you promise and guarantee to operate the dealership in accordance with Texas laws and regulations. Failure to do so means a claimant can seek money through this bond. Here’s one example of how to apply for a Texas surety bond.
Step 6: Application Submission
You’ve jumped through many hoops, so now’s the time to finalize and submit the dealer application to the Texas Department of Motor Vehicles. You can do this online through the eLicensing system—there’s a lot of information to provide, but the details are covered in the six-hour course. It’s a good idea to review the course information covering the application process to minimize the chances of errors and subsequent delays.
Step 7: Keep Up with Business Hours and Records
Retail businesses in Texas are required to open at least four days a week and for at least four consecutive hours a day. Wholesaler GDNs are required to be open two days a week and two hours a day. The state also has weekend sales rules. For instance, a dealership can be open Saturdays and Sundays, but cars can only be sold on one of those days. Record-keeping regulations require thorough documentation for every vehicle transaction over the past 48 months, but tracking every vehicle bought or sold, regardless of date, is the best approach.
And with these steps completed, you can be the proud holder of a Texas car dealer license.