By Michael G. Charapp
Charapp & Weiss LLP
As a franchised dealer, you regularly deal with issues arising from factory recalls. As a best practice, you should involve all departments of your dealership.
Under federal law, you cannot deliver a new car subject to a recall unless it is repaired. Unfortunately, we sometimes see deals involving new cars delivered with open recalls because the vehicle was not flagged as undeliverable in the dealership’s system. Flagging new vehicles with open recalls is essential.
Federal law also forbids sale and delivery of a part subject to a recall. Just like with the new car department, you must flag a recalled part as unsaleable.
Your service department bears the burden of repairs on all vehicles whether they are new vehicles, used vehicles, or customer vehicles. And your used car department must be aware of the recall status of vehicles it is going to sell. While you do not need to ground used vehicles with open recalls (unless your franchisor notifies you to ground used vehicles of the line make for which you hold a franchise), you should do everything you can to remedy open recalls. If you can’t, then you should notify the customer of the open recall, and the need for a remedy once a fix or parts are available.
To help your personnel understand the best practices for recalls, we have developed a checklist:
New Vehicle Department
- Recall on a new vehicle? Ground it. A new vehicle with an unrepaired recall cannot be delivered until the recall is remedied.
- When you receive notice of a recall on a new vehicle, notify the new car department so it may flag units subject to recall as undeliverable until the recall is remedied.
- When you receive a vehicle from your franchisor, you should check to see if there is an open recall. However, if the vehicle is in inventory several months, you are not protected unless you check again before delivering the vehicle. A recall may have been announced after your receipt of the vehicle. Notification to your store may not have been noted in your inventory records. Check the recall status of the new vehicle before delivery to the buyer.
- Know your rights to compensation for grounded new vehicles – “the manufacturer shall reimburse the … dealer for the reasonable value of the installation [of parts or equipment] 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 … or the defect is corrected.” 49 USC §30116 (b)
- Federal Law – A part subject to recall cannot be sold.
- When you receive notice of a recall, notify the parts department
- Parts subject to recall should be flagged as unsaleable
- Parts necessary to repair new cars should be ordered.
- When you receive notice of a recall, notify the service department so that it can prepare to serve affected customers.
- When a customer comes to the dealership for service on a line make vehicle for which the dealer has a franchise, check for an open recall and notify the customer of any open recall.
Used Vehicle Department
- When a used vehicle is acquired, check safercar.gov or your franchisor’s website to determine whether there is an open recall.
- If there is an open recall on a used vehicle, repair the vehicle if it is a line make for which the dealer has a franchise. If it is line make for which the dealer does not have a franchise, contact an affiliate or neighboring dealer to arrange for repair.
- Check again prior to delivery to a customer to determine if there is an open recall on the vehicle. If there is no “fix” or if parts are unavailable to remedy the recall, you need not ground the used vehicle (subject to the exception below), but you should notify the customer of the open recall and the need to remedy the recall as soon as a fix or parts are available.
- If you are selling a used vehicle with an open recall, do not certify it.
- If you are selling a used vehicle with an open recall, do not advertise it with claims that it is safe.
- If the vehicle is of a line make for which your dealership has a franchise, and the franchisor instructs its franchisees to ground certain used vehicles, you should ground them.
- If you have grounded used vehicles based on direction of your franchisor, check state law to see if you are eligible for compensation.
- Establish a process to notify a buyer of a used vehicle with an open recall when a fix or parts are available for remedy.