The Licensing Process to Operate a Car Dealership in Texas

 Posted on January 15, 2026 in Business Law

If your dream is to run your own car dealership, one of the first steps is obtaining the required Texas DMV occupational licenses. The state has strict regulations in place for motor vehicle sales, so working with experienced legal and compliance advisors is highly recommended when pursuing your goal of getting set up to sell cars. A San Antonio, Texas small business attorney can help you with the legal side of things.

Geoff Mayfield, Attorney at Law, has years of experience representing small business owners. We take the time to understand your priorities, providing one-on-one counsel and practical legal advice to help realize your goals. 

Five Steps for Obtaining a Texas Dealership License in 2026

Opening a car dealership is exciting, but it can also feel overwhelming if you are unfamiliar with Texas licensing rules. Many first-time dealers are surprised by how detailed the requirements are and how much paperwork is involved. Understanding the process ahead of time can save you stress, delays, and costly mistakes. With the right preparation and guidance, the path to licensure becomes far more manageable.

Review Your Licensing Options

Dealership licensing options usually depend on what you plan to sell and how you plan to sell it. Some licenses cover new vehicles sold under a manufacturer agreement. Others apply to used vehicles sold to the public. There are also licenses for motorcycles, trailers, and wholesale dealers who sell only to other licensed dealers. The Texas Department of Motor Vehicles (TxDMV) issues several types of dealer licenses. The following are the most commonly used license types for car dealerships in Texas:

• Franchise Dealer License: This license is for dealers who sell new vehicles for a manufacturer. Examples include Ford, Toyota, or Chevrolet. Franchise dealers must have a contract with the manufacturer. They must also operate from a physical lot and meet strict building and signage rules. Franchise dealers may also sell used vehicles.

• Independent Motor Vehicle Dealer License (GDN): This license is for dealers who sell used vehicles and are not tied to a manufacturer. Independent dealers receive a General Distinguishing Number, or GDN. Some dealers need extra endorsements, depending on how they operate. Independent dealers must meet bonding, location, and recordkeeping requirements.

• Salvage Dealer License: This license is for businesses that buy or sell salvage or damaged vehicles. It also applies to dealers who rebuild vehicles. Salvage dealers must follow special rules for titles and disclosures. Record-keeping rules are often stricter for these dealers.

Selecting the wrong license can delay approval or limit what you are legally allowed to do. A lawyer can help you identify the correct license type based on your business plan and long-term goals.

Meeting the Required Qualifications

To qualify for a dealer license, all applicants must meet basic requirements. You must be at least 18 years old and pass a background check. A conviction doesn’t automatically disqualify you, but the TxDMV will factor in the seriousness of the crime before issuing a license. In many cases, you will also have to take a dealer education course. These courses explain Texas vehicle laws, consumer protection rules, and recordkeeping duties. Taking the course early helps you understand your responsibilities as a dealer. It can also help you avoid compliance problems later.

The bonding requirement is another important step. A surety bond protects consumers if a dealer breaks the law or fails to meet legal duties. The bond must be in the correct amount and properly documented, as explained under Texas Administrative Code Sec. 215.137. Mistakes with bond paperwork can delay approval. Legal guidance can help make sure the bond meets all TxDMV requirements.

Submitting the License Application

The TxDMV provides checklists that explain exactly what documents and forms you must submit with your dealer license application. These materials include the main application, surety bonds, proof of dealer education, photos of your location, and required fees. The checklists also flag small but important details, such as how forms must be signed, which items require notarization, and whether your photos meet the agency’s requirements. 

Passing Inspections and Background Checks

After you submit your license application, the TxDMV reviews it to make sure everything is complete. The agency also runs background checks on owners, officers, and controlling persons. An inspection of the dealership location will be scheduled as well. During this inspection, the TxDMV checks that the building, zoning, and signage meet state requirements. Any problems must be fixed before the license can be approved.

A lawyer who understands TxDMV rules can review your application before you submit it. This review lowers the risk of rejection and helps catch problems early. In many cases, this saves weeks or even months. 

Maintaining Compliance Post-Licensure

Even after a dealership is licensed, the state continues to closely monitor how it operates. If a dealer breaks sales rules or standards, the state can issue fines or suspend the license. Following the rules at all times is essential. Reliable legal guidance can help new dealerships stay on track in a strict regulatory system.

Dealers must keep clear and accurate sales records. They must also follow advertising rules and complete title transfers correctly. When dealers fail to meet these duties, the state may conduct audits or take enforcement action. Many new dealers run into trouble not because they intended to break the rules, but because they did not fully understand them.

Compliance is an ongoing responsibility, not a one-time step. Regular legal guidance can help dealerships adjust to rule changes and avoid penalties. This kind of support becomes even more important as a dealership grows or adds new services.

Contact a San Antonio, TX Small Business Lawyer

While the licensing process can be complicated for car dealers, it is a crucial step in legally and securely launching your business. Starting off compliant reduces future risk. Working with a Bexar County, TX small business attorney can help expedite the process by doing everything right the first time. Do not let the paperwork stand in the way of your dealership dreams. Call Geoff Mayfield, Attorney at Law at 210-535-0870 for a free consultation.