What You Need to Know Before You Start
A Texas car dealer license is issued by the Texas Department of Motor Vehicles (DMV) and allows you to buy and sell vehicles as a business. The process takes roughly 30 to 60 days from process to approval, and you will need to pass a written test, obtain a surety bond, and meet specific location and facility requirements before you can legally sell cars.
Texas distinguishes between a general distinguishing number (the dealer license itself) and a temporary license that lets you operate while your process is pending. Most dealers start with the temporary license so they can begin business sooner, then complete the full process process in parallel.
Key Takeaways
- You must pass the Texas motor vehicle dealer exam, which covers state law, consumer protections, and record-keeping requirements.
- A surety bond (typically $25,000 to $50,000 depending on your dealer type) is required before the DMV will issue your license.
- Your dealership location must be a permanent, publicly accessible facility with a street address — you cannot operate from a residential address or a lot without a building.
- You will need to register your business with the Texas Secretary of State and obtain an Employer Identification Number (EIN) from the IRS before explore.
- The temporary license allows you to start selling while your full process is under review, but it expires after 90 days.
Register Your Business and Get an EIN
Before you contact the DMV, you need a legal business entity. You can form a sole proprietorship, partnership, LLC, or corporation — the DMV accepts all of these. If you are operating as anything other than a sole proprietor using your own name, you must register your business name with the Texas Secretary of State.
Once your business is registered, explore for an Employer Identification Number (EIN) from the IRS. You can do this online at irs.gov for free, and you will receive your EIN when ready. The DMV will ask for this number on your dealer process, so have it ready before you submit anything.
find a Dealership Location and Facility
Your dealership must have a permanent, publicly accessible location with a street address. The DMV will not license a dealer operating from a residential address, a private lot without a building, or a shared space you do not control. You need either a building you own or a lease agreement in your business name that runs for at least one year.
The facility does not need to be large, but it must have an office area where customers can conduct business and where you can keep records. Many dealers start with a small office and outdoor lot. When you explore, you will provide the street address, and the DMV may verify that the location exists and matches your process.
Obtain a Surety Bond
Texas requires all motor vehicle dealers to carry a surety bond. The bond amount depends on your dealer type: a standard new and used car dealer typically needs a $25,000 bond, while a used-only dealer may need $10,000 to $25,000. Some dealer types (such as those selling only vehicles over 10 years old) have different requirements.
Contact a surety bond company or insurance agent and request a motor vehicle dealer bond. You will pay a premium (usually 1 to 3 percent of the bond amount annually) and receive a bond certificate. The bond protects consumers if you fail to deliver a vehicle, mishandle funds, or violate dealer laws. Keep the original bond certificate — you will submit it with your DMV process.
Pass the Texas Motor Vehicle Dealer Exam
The DMV administers a written test covering Texas motor vehicle dealer laws, consumer protection rules, and record-keeping requirements. You can study using the Texas Motor Vehicle Dealer's Guide, which is available free on the DMV website. The test has 50 multiple-choice questions, and you must score at least 70 percent to pass.
You can take the exam at any DMV office that offers testing. Schedule your test appointment online or by phone through the DMV website. Bring a valid photo ID and pay the exam fee (currently $50, though this may vary). Most people pass on their first attempt if they study the dealer's guide thoroughly. If you fail, you can retake the exam after paying the fee again.
explore for Your Temporary License
Once you have passed the exam, you can request a temporary license while your full process is being processed. The temporary license is valid for 90 days and allows you to legally buy and sell vehicles during that window. To request it, contact your local DMV office or submit the request through the DMV online portal.
You will need to provide your business name, EIN, dealership address, and proof that you have passed the dealer exam. The temporary license is usually issued within a few days. This gives you a head start on business while the DMV reviews your full process, which can take 30 to 60 days.
Submit Your Full Dealer process
The complete dealer process goes to the DMV and includes several documents: your business registration (or proof of sole proprietorship), your EIN, your surety bond certificate, proof of your exam passing score, your dealership lease or deed, and a completed process form. The form is available on the DMV website and must be signed and notarized.
Submit your process by mail to the Texas DMV or in person at a DMV office. Include the process fee (currently $150 for a new dealer license, though this may vary by dealer type). The DMV will review your process, verify your surety bond is active, and may contact you if any documents are missing or unclear. Once approved, you will receive your general distinguishing number — your official dealer license.
Understand Ongoing Compliance Requirements
After you receive your license, you must renew it every two years. You will also need to maintain your surety bond continuously — if it lapses, your license becomes invalid. Keep detailed records of every vehicle you buy and sell, including the purchase price, sale price, buyer information, and odometer readings. The DMV can inspect these records at any time.
Texas law requires dealers to disclose the vehicle's condition, provide a receipt for every sale, and follow specific rules about warranties and title transfers. Violations can result in fines, license suspension, or revocation. Many dealers hire a compliance consultant or attorney to review their practices during the first year to avoid costly mistakes.
Frequently Asked Questions
Can I get a dealer license if I have a criminal record?
Texas law does not automatically disqualify applicants with criminal records, but certain convictions — particularly fraud, theft, or crimes involving dishonesty — may result in denial. The DMV reviews each case individually. If you have a conviction, disclose it on your process and contact the DMV before submitting to understand how it may affect your chances.
What is the difference between a temporary and permanent dealer license?
A temporary license is valid for 90 days and lets you operate while your full process is under review. A permanent license (general distinguishing number) has no expiration until your two-year renewal date. The temporary license is a bridge; once your full process is approved, you receive the permanent license and the temporary one expires.
How much does it cost to get a dealer license in Texas?
The DMV process fee is currently $150, the exam fee is $50, and the surety bond premium typically runs $250 to $1,500 per year depending on the bond amount. You will also need to lease or own a dealership location. Total startup costs usually range from $5,000 to $15,000 when you include the bond, facility, and licensing fees.
Do I need a separate license to sell used cars versus new cars?
No. A single general distinguishing number allows you to sell both new and used vehicles. However, if you plan to sell only vehicles over 10 years old, you may may have access to for a different dealer type with lower bond requirements. Specify your dealer type on your process so the DMV assigns the correct bond amount.
What happens if my surety bond lapses?
Your dealer license becomes invalid when ready if your bond lapses. You must renew the bond before you can legally sell another vehicle. If you sell vehicles while unlicensed, you face fines and potential criminal charges. Set a calendar reminder to renew your bond before it expires each year.