Texas Salvage Dealer License Requirements

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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 salvage dealer license bond needs. View the Texas salvage dealer license requirements, below.

What Salvage Dealer Licenses Are Issued in Texas?

Explore the salvage dealer licenses that are issued in Texas:

  • If you’ll be rebuilding repairable motor vehicles and selling more than five of them in a calendar year, you’ll need a used car dealer (GDN) license.
  • If you’ll be selling more than five nonrepairable vehicles per calendar year for parts or scrap, you’ll need only a salvage dealer license.
  • If you buy or sell less than five repairable or nonrepairable vehicles per calendar year, no license is required.

What Are the Requirements for Licensing?

Most requirements are the same whether you’re seeking a salvage dealer license or a GDN license from the Texas Division of Motor Vehicles (TxDMV):

  • Establishing a business location that meets certain state-mandated criteria
  • Setting up a legal business entity and registering it properly
  • Registering your business with the National Motor Vehicle Title Information System (NMVTIS) and obtaining an NMVTIS number
  • Completing and submitting a license application to TxDMV and paying the necessary fees

The one difference is that obtaining a GDN license that will allow you to sell rebuilt vehicles requires you to purchase a $25,000 Texas auto dealer bond.

Why is a Texas Auto Dealer Bond Required?

The bonding requirement for salvage dealers who need a GDN license is intended to:

  • Ensure the salvage dealer’s compliance with Texas laws governing the purchase and sale of rebuilt and other used vehicles
  • Indemnify TxDMV against liability for damages consumers incur as a result of the dealer’s unlawful or unethical business practices
  • Provide a source of funds for compensating consumers for such damages

Failure to keep a valid bond in force at all time can result in suspension or revocation of the salvage dealer’s GDN license.

How Are Texas Auto Dealer Bond Claims Paid?

The surety bond that salvage dealers need to obtain a GDN license is a legally binding contract between three parties known as the “obligee,” the “principal,” and the “surety”:

  • The obligee requiring the bond is TxDMV.
  • The principal required to purchase the bond is the auto dealer.
  • The surety is the bonding company that authorizes the bond.

The terms of the surety bond agreement make the principal legally responsible for paying all valid claims against the bond. However, the surety usually ensures prompt satisfaction of a claim by paying it initially, on the principal’s behalf. So instead of paying the claimant directly, the principal repays the surety.

How Much Does a Texas Auto Dealer Bond Cost?

The principal will pay a premium that’s a small percentage of the $25,000 bond amount, that percentage being the premium rate. The surety establishes the premium rate for each bond based largely on the principal’s personal credit score. A high credit score suggests that there’s little risk to the surety in paying claims on behalf of the principal, so the premium rate could be as low as one percent, making the annual premium $250. Lesser credit would result in a higher premium rate.

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Our surety bond professionals will get you a competitive rate on the auto dealer bond you’ll need to meet the Texas salvage dealer license requirements.