ABC News sent undercover reporters to several Metro Area new vehicle dealerships in March to see if those dealers would sell them vehicles with open recalls. The undercover investigation was in response to the discovery by ABC of the sale of several hundred new vehicles with open recalls in 2014. Under federal law it is illegal to sell a new vehicle without first repairing the vehicle.
The news report highlighted a New Jersey dealer who sold and delivered a new vehicle with an open recall to an undercover reporter. During the investigation a New York dealer was also found to have sold several new vehicles with open recalls. Both dealers have since taken steps to prevent such incidents from reoccurring.
The National Highway Traffic Safety Administration (NHTSA) can fine dealers up to $7,000 per occurrence for the sale of a new vehicle subject to an open recall. These fines can add up quickly. More importantly, if a customer is injured or worse as a result of an accident caused by the unrepaired recall the dealer may be subject to civil lawsuits seeking millions of dollars.
The following is a summary of your legal obligations in the event of a manufacturer recall.
1. SALE OF NEW VEHICLES
It is a violation of federal law to sell a new motor vehicle while the vehicle is still subject to an unrepaired recall. NHTSA has made it clear that dealers must not deliver a vehicle to a customer and promise to repair it later. The best practice is to check each vehicle as it is entered into your police book and then check it again when it undergoes its final preparation for delivery. If you have a new vehicle on your lot that is subject to a recall remove it from your available inventory as quickly as possible. Once the recall repairs are complete you can once again offer that new vehicle for sale.
2. PARTS
Replacement motor vehicle parts in a dealer's inventory which are the subject of a manufacturer's recall are under the same rule as the sale of new vehicles. A dealer must not sell recalled parts until the repairs are completed.
3. USED VEHICLES
Used vehicles subject to recall are a tricky issue for dealers. Federal law does not specifically prohibit or penalize the sale of a used vehicle subject to a recall. However, a dealer who sells new units of a particular brand, who also sells a used vehicle of that same brand having an unrepaired recall defect, runs the risk of significant liability. If there is an accident related to the unrepaired defect, the dealership may be subject to a lawsuit claiming negligence for selling a vehicle with a defect it knew, or should have known, was subject to recall.
Sound business practices
In the event of a recall, dealers must establish procedures for the proper handling of all vehicles and parts which are subject to the recall. The procedures should include:
- Forwarding of all recall notification material to their sales department, parts department, and service department managers for immediate review and processing.
- Immediate review of all vehicle inventories to determine whether the dealership has any vehicles in their inventory which are subject to the recall and to take immediate action to have those vehicles repaired. Remember; if the repairs cannot be made prior to delivering the vehicle to the customer it cannot be sold.
- In the parts department, management should determine whether parts subject to the recall are in inventory. If so, those parts cannot be sold until they can be repaired or until replacements arrive. Dealers should order any parts needed for recall repairs at expected demand levels.
- The service department must implement procedures to carefully and appropriately handle customer requests for recall repairs and to handle recall repairs for units in inventory. It is likely that call volume and service appointment requests from customers will be heavy so allocate appropriate levels of additional personnel to handle the additional calls and service appointments.
