How to Obtain a Car Auction License in Texas

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Surety Bond Professionals is a family-owned and operated bonding agency with over 30 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your Texas car auction license bond needs. Learn how to obtain a car auction license in Texas, below.

What Is a Texas Car Auction License?

The Texas DMV issues several different types of dealer licenses. In order to sell used vehicles at auction, you’ll need to become licensed as a wholesale auction dealer, which has its own GDN, or General Distinguishing Number. Only dealers with a wholesale auction GDN may hold a wholesale (dealer-to-dealer) auction.

Licensed motor vehicle dealers may sell their own inventory at auction on their own lot, but they must use an auctioneer who is licensed by the Texas Department of Licensing and Regulation.

What Are the Steps in the Licensing Process?

Several pre-licensing requirements must be met before you apply for any Texas car dealer license. For example, you must set up your business, whether you’re going to operate as a sole proprietorship, LLC, partnership, or corporation, and register it with the Texas Secretary of State. You must also establish a permanent business location that meets all DMV requirements.

One mandatory step in the licensing process, regardless of the specific type of dealer license, is to purchase a surety bond in the amount of $25,000. It must have a two-year term that matches the two-year term of the dealer license.

Finally, you’ll need to complete your dealer license application and submit it along with all required supporting documents. Be sure to pay the appropriate fees by either e-mail or regular U.S. mail.

Why is a Texas Car Auction License Bond Required?

A Texas car auction bond is a type of surety bond that’s classified as a license bond. This is because purchasing one is a prerequisite for licensing as a car dealer, including as an auction dealer. The bond serves as a dealer’s pledge to operate in full compliance with all state laws and the regulations of the Texas Department of Vehicles. The bond also provides financial protection for the state and ensures the availability of funds to compensate those who are harmed financially by the dealer’s unlawful or unethical actions.

How Are Texas Car Auction License Bond Claims Paid?

The surety bond agreement backing a Texas car auction bond is a legally binding contract between three parties known as the obligee (the Texas DMV), the principal (the wholesale auction dealer), and the surety (the bonding company that authorizes the bond). The terms of that agreement indemnify the obligee and the surety against responsibility for paying claims and make the principal solely responsible for doing so.

In practice, the surety will first make sure that a claim is valid and then pay it on behalf of the principal.  The principal must subsequently reimburse the surety for that amount.

How Much Does A Texas Car Auction License Bond Cost?

The surety’s main consideration in determining the premium rate a given dealer will pay for a Texas car auction bond is his or her personal credit score. That’s the best indicator of the risk of paying claims on behalf of the principal. With good credit, the principal should pay a premium that’s in the standard market range of 1-2% of the required $25,000 bond amount.

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