Compensation for Grounded New Vehicles

Are you being compensated by your factory when you must ground new vehicles because of recalls?

The National Highway Traffic Safety Act requires a manufacturer or distributor of a new motor vehicle not yet sold to a customer that has a safety defect either to repurchase the vehicle or to provide the part or equipment to correct the defect.

That provision has some other important features. It requires the manufacturer to pay a dealer whose unit is grounded for the period it could not be delivered:dealership

(b) Distributor or dealer installation. The distributor or dealer shall install the part or equipment referred to in subsection (a)(2) of this section. If the distributor or dealer installs the part or equipment with reasonable diligence after it is received, the manufacturer shall reimburse the distributor or dealer for the reasonable value of the installation and a reasonable reimbursement of at least one percent a month of the manufacturer’s or distributor’s selling price prorated from the date of notice of noncompliance or defect to the date the motor vehicle complies with applicable motor vehicle safety standards prescribed under this chapter [49 USCS §§ 30101 et seq.] or the defect is corrected.

49 USC §30116 (b). This reimbursement is appropriate, since a dealer with a vehicle in inventory it cannot sell will accrue floorplan interest for which it should be compensated.

The statute does even more. If a manufacturer does not comply with its obligation to resolve the defect, pay the dealer its cost for doing so, and pay the dealer the established amount due for carrying the grounded vehicle, the dealer can sue in federal court “to recover damages, court costs, and a reasonable attorney’s fee”.

In recent months, there have been as many highly publicized recalls as we have ever seen. Some affect new vehicles, and dealers have had to ground vehicles in inventory. If you have vehicles you had to ground, have you been reimbursed by the factory for 1% of the vehicle cost for the period it was grounded?

If you have not, then you should review your factory manual to determine if there is an application process for reimbursement. If there is no reimbursement process, then a letter to the manufacturer identifying the grounded units and requesting the reimbursement is in order.