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NADA Issues Safety-Related Defect Notice ::7 days ago

Last week, Toyota issued a “stop sales order” to address a safety-related defect associated with a significant percentage of its new vehicle fleet. The federal Motor Vehicle Safety Act (the “Safety Act”) and National Highway Traffic Safety Administration regulations generally govern safety-related vehicle defect recalls.

1. As a reminder, the federal Safety Act prohibits the sale and delivery of new vehicles subject to orders such as the one Toyota issued unless and until the defect is corrected. 49 USC 30120(i)(1). It does not prohibit dealers from offering such new vehicles for sale, as long as the dealer does not actually sell or lease the vehicles. 49 USC 30120(i)(2); 49 CFR Part 573.11(b). More details can be found here.
2. Note also, the resale of used vehicles subject to a safety defect recall, such as the affected Toyota used vehicles, is not prohibited by the federal Safety Act. 49 USC 30112(b). However, there may be potential liability concerns under state law. Accordingly, all dealers should consult their attorney about their obligations before selling any of the affected new or used Toyota vehicles.

This is not intended as legal advice, dealers should consult with their own attorney with any questions they may have.