Texas Auto Dealer Bonds

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 auto dealer bond needs.


What Are They?

Texas auto dealer bonds are surety bonds that play an important role in upholding the integrity of the Texas auto trading industry. In purchasing an auto dealer bond, a dealer pledges to operate in full compliance with the Texas Transportation Code. Violations that cause the state or the public to experience a financial loss can result in claims against the dealer’s bond. So while Texas auto dealer bonds deter unlawful or unethical conduct by dealers, they also provide a way to compensate an injured party when a violation does occur.


Who Needs Them?

Purchasing an auto dealer bond is a prerequisite for licensing as an auto dealer in Texas. Anyone applying for a Texas auto dealer license must furnish a $50,000 Texas auto dealer bond with a two-year term. Dealers selling more than one type of vehicle may need to be licensed in more than one category and provide more than one Texas auto dealer bond.

Speak with a Surety Bond Professionals agent today to discuss your bonding needs.


How Do They Work?

There are three parties to every Texas auto dealer bond, which is a legally binding contract:

  • The Texas Department of Motor Vehicles, which requires the bond, is referred to as the bond’s “obligee,”
  • The dealer purchasing the bond and legally obligated to pay valid claims against it is the bond’s “principal,” and
  • The party guaranteeing the bond is known as the “surety.”

The obligee can file a claim against an auto dealer bond to recover taxes and fees a dealer has not remitted as required. And consumers who have been defrauded by a dealer who has, for example, altered a vehicle’s title or deliberately provided misleading information about a vehicle’s condition, can file a claim for any resulting monetary damages.  

The surety will investigate to ensure that a claim is legitimate before paying it on behalf of the principal.  That doesn’t mean the principal is off the hook, as the legal obligation to pay claims rests solely with the principal. The principal must subsequently reimburse the surety and could be subject to legal action if the debt to the surety is not repaid.


What Do They Cost?

What you will pay to purchase a Texas auto dealer bond depends on the premium rate the surety sets for you. That could be anywhere from less than one percent to more than three percent, depending on how risky the underwriters think it is for the surety to pay claims on your behalf and wait to be reimbursed. Your personal credit history is the main factor considered in assessing that risk. The higher your personal credit score, the lower the risk you present, and the lower your premium rate will be.


Get a Quote

Our surety bond professionals will get you the Texas auto dealer bond you need at a competitive rate.