Texas MVD bonds are surety bonds required by the Texas Department of Motor Vehicles (TxDMV) for certain businesses to guarantee compliance with the regulations of the department. The bond guarantees that the business will comply with the Texas Motor Vehicle Commission and the Texas Transportation Code. The bond amount varies depending on the type of business, and is typically between $25,000 and $100,000. Failure to comply with the regulations can result in the forfeiture of the bond. The bond is a three-party agreement between the TxDMV, the business, and the surety company. The surety company is responsible for covering any losses incurred due to the business’s failure to comply.
What is an Texas Car Dealer Bond?
Texas Car Dealer Bonds are required by Texas's DOT to obtain your Dealer license. The MVD Bond amount for the sale of New and used vehicles is set at $50,000. The Auto Dealer bond ensures that the principal shall comply with the conditions of any contract made by such licensee in connection with the sale or exchange of any motor vehicle and shall not violate any of the provisions of law relating to the conduct of the business for which it is licensed.
The State requires a Car Dealer bond for each license you hold:
$50,000 surety bond for New and Used Motor Vehicle Dealers, Public Consignment Auction Dealers and for any other type of dealer
Different parts of a bond:
There are 3 parts to a MVD surety bond. The Principal "YOU", The Surety Company, and the Obligee. The Principal is the business or individual applying for the MVD Surety Bond. The Obligee is the individual or entity requiring the Surety Bond and the Surety Company is the company who provides the Surety Bond coverage.
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Texas MVD Bond Information and Requirements:
Independent Motor Vehicle - May buy, sell, or exchange any type of used cars, trucks, motor homes, and neighborhood vehicles. May buy, sell, repair, or rebuild salvage motor vehicles and nonrepairable motor vehicles. May use dealer's temporary tags, buyer's temporary tags, and metal dealer license plates on motor vehicles only. Must provide a bond.
Independent Motorcycle - May buy, sell, or exchange any type of used motorcycles, motor scooters or ATVs. May buy, sell, repair, or rebuild salvage motor vehicles and nonrepairable motor vehicles. May use dealer's temporary tags, buyer's temporary tags, and metal dealer license plates on motorcycles, motor scooters or ATVs only. Must provide a bond.
Travel Trailer - May buy, sell, or exchange used travel trailers. May buy, sell, repair, or rebuild salvage motor vehicles and nonrepairable motor vehicles. May use dealer's temporary tags, buyer's temporary tags, and metal dealer license plates on travel trailers only. Exempt from the security requirement.
Trailer/Semitrailer - May buy, sell, or exchange new or used utility trailers and/or semitrailers. May buy, sell, repair, or rebuild salvage motor vehicles and nonrepairable motor vehicles. May use dealer's temporary tags, buyer's temporary tags, and metal dealer license plates on trailers/semitrailers only. Exempt from the security requirement.
Wholesale Dealers - May sell or exchange vehicles only with other licensed dealers. Are NOT required to have a five-vehicle display area. May NOT sell vehicles to retail purchasers. Wholesale vehicle dealers may buy, sell, or exchange used vehicles, including motor vehicles, motorcycles, and travel trailers. May buy, sell, or exchange new or used trailers and/or semitrailers. May use temporary tags and metal dealer license plates. Must provide a bond.
What You Need to Know About Starting Your New Dealership
Motor Vehicle Inventory Tax Statement (VIT) and Inventory Declaration (Declaration):
Within 30 days of the active date of your license, (not when you open for business or start selling vehicles), notify both the county tax office and appraisal district where the dealership is located that you are a new dealer and request to setup an account.
VIT: A VIT reports information on vehicles sold in the previous month. File these at both the county tax office and appraisal district. Regardless if no sales are made, you must still file the form reporting zero sales. If filed late, penalties may be assessed. (Most often due on the 10th day of each month, check with your county for details.)
Declaration: A Declaration reports the total number of sales made during previous year. File these at both the county tax office and appraisal district. Regardless if no sales are made, you must still file the form reporting zero sales. If filed late, penalties may be assessed. (Due between January 1 - February 1 of each year.
If you intend to provide in-house or third party motor vehicle financing sales, contact the Office of Consumer Credit Commission at 512-936-7600, toll free at (800) 538-1579 or at www.occc.state.tx.us to obtain the required sales finance license.
Vehicle Sales to Retail Purchasers:
Once a vehicle is sold, you have 20 business days for cash sales and 3rd party financed sales (or 45 calendar days for in-house financed sales) to file the appropriate paperwork with the county tax office. This process includes transferring title of the vehicle to the retail purchaser, paying vehicle registration fees [registering the vehicle on behalf of the customer], and paying sales taxes. If you need help with this process, contact the TxDMV Customer Service at (888) 368-4689, or your local county tax office.
Minimum Vehicles Sales:
You must remain regularly and actively engaged in business by selling or assigning at least 5 vehicles in a calendar year or the license may be revoked or canceled.
Once licensed, you should receive two separate emails providing you with a user name and password to access the eTAG System.
This mandatory program allows you to issue temporary registration tags for every motor vehicle, motorcycle, motor scooter, travel trailer and trailer/semitrailer you sell.
If you have problems with the eTAG System, call (512) 465-4010.
If you have any questions regarding the creation of an eTAG account or rules for their use, please call (888) 368-4689 or email [email protected]
Changing License Information:
You are required to ensure the information on your license record is current. Common changes are:
Contact information changes, such as mailing address, phone number, or email
Moving: adding or closing locations
Business changes, such as ownership, management, business name or DBA changes