Thinking of opening a car dealership in the great state of Texas? You’re in luck because Texas is ranked as one of the top five states for going into the car dealership business. However, the industry is strictly regulated and dealerships (with the exception of franchises) must purchase a motor vehicle dealer bond to meet state requirements.

A motor vehicle dealer bond, also known as an auto dealer bond, is a type of license surety bond that represents an agreement between the dealership, the Texas Department of Transportation and the surety company. Essentially, the bond guarantees the DOT that the dealer will follow all laws and regulations in business operations. This bond also protects customers from the potential of fraud. If the dealer breaches this agreement, the surety company becomes responsible for compensating the appropriate party.

When applying for a motor vehicle dealer bond, you will have to provide the surety company with information like the size and location of your dealership and financial statements, along with consent to a background check and credit score evaluation. The company will use the collected information to determine the likelihood of your dealership filing a claim.

With a good credit score, your dealership may only pay one to three percent of the total fixed price of the bond, while a dealership with a poor credit score may pay closer to 15 percent. Your independent insurance agent can give you a more accurate, customized quote with one phone call.

Protect your dealership today. Call Texas Insurance Agency at (954) 345-2600 for more information on Houston surety bonds.