Surety bond required by the Texas Department of Motor Vehicles (TxDMV) Motor Vehicle Division for every General Distinguishing Number (GDN) license holder selling five or more vehicles per year.
The Texas auto dealer bond — formally the "Motor Vehicle Dealer Bond" under Texas Occupations Code §2301.261 — is a $25,000 surety bond that licensed Texas dealers must post with TxDMV before they can be issued a GDN (General Distinguishing Number). The bond protects retail buyers, lienholders, and the State of Texas from financial harm caused by:
Texas requires the bond to be filed on TxDMV form VTR-872 or via the surety's electronic filing portal.
The bond requirement varies by license category. Most categories require the standard $25,000 bond:
| Dealer Type | Bond Amount | Notes |
|---|---|---|
| Independent (used) GDN | $25,000 | Most common; sells 5+ used vehicles/yr |
| Franchise dealer | $25,000 | New-vehicle franchise of a manufacturer |
| Wholesale GDN | $25,000 | Dealer-to-dealer sales only |
| Wholesale auction | $25,000 | Per location |
| In-Transit (drive-away) | $25,000 | Operators delivering vehicles |
| Salvage / Rebuilder | Not required | Different licensing program |
Motorcycle and trailer dealers under TxDMV also fall under the $25,000 requirement. Independent used motor vehicle dealers must additionally complete a 6-hour pre-licensing education course before TxDMV will issue the GDN.
Premiums on a $25,000 Texas dealer bond are credit-based. Approval is generally fast because the bond amount is modest and Texas dealer claims are relatively predictable.
| Credit Profile | Annual Premium | Approx. Rate |
|---|---|---|
| Excellent Credit | $175 – $250 | 0.7% – 1% |
| Good Credit | $250 – $375 | 1% – 1.5% |
| Fair Credit | $375 – $625 | 1.5% – 2.5% |
| Credit Challenges | $625 – $1,000 | 2.5% – 4% |
| Past Credit Issues | $1,000 – $1,250+ | 4% – 5%+ |
The Texas dealer bond runs concurrent with the GDN license — typically a 2-year term. TxDMV will not renew your GDN without proof of an active bond. Most sureties send renewal notices 60 days before expiration; lapses create immediate license issues and can interrupt vehicle title transfers.
Yes. Each GDN-licensed location requires its own $25,000 bond. A multi-location dealer with three lots needs three bonds.
No. Texas's "5-vehicle rule" exempts hobbyists and casual sellers. Selling 5 or more vehicles in a 12-month period requires a GDN, which requires the bond.
Common claims involve titles not transferred within 30 days. The surety investigates; if valid, they pay the buyer up to the $25,000 limit, and you're required to reimburse the surety. Repeat claims make renewals expensive.
Yes — the bond protects the State of Texas for unremitted sales tax collected from buyers. If you collected tax and didn't forward it, the comptroller can claim against the bond.
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