Stop-Sales on New Vehicles
Federal law provides that a manufacturer must reimburse dealers for new vehicles that have open recalls that cannot be repaired. Federal law prohibits the sale of a new vehicle with an open safety recall. Once you receive a new vehicle and a stop sale is issued by your manufacturer, the factory either has to repurchase the vehicle or reimburse you for the time you held back the vehicle from sale. Your factory must reimburse you for labor and parts under our Florida warranty reimbursement law for installing the replacement part. Your factory must also reimburse you at 1% per month of the manufacturer’s selling price (NADA says this means invoice price), for the time you held the vehicle from the date of the recall notice until they either repurchase the vehicle or you receive and install the new parts. If your factory fails to properly reimburse you for the work performed and/or the reimbursement for the time you held back the vehicle, you can bring an action in a US district Court to recover damages, court costs and reasonable attorney fees under 49 U.S. Code § 30116.
The federal statute follows: Per NADA, one could argue about what “selling price” means and our association has defaulted to what the dealer is invoiced.
49 U.S. Code § 30116 – Defects and noncompliance found before sale to purchaser(a) Actions Required of Manufacturers and Distributors.—If, after a manufacturer or distributor sells a motor vehicle or motor vehicle equipment to a distributor or dealer and before the distributor or dealer sells the vehicle or equipment, it is decided that the vehicle or equipment contains a defect related to motor vehicle safety or does not comply with applicable motor vehicle safety standards prescribed under this chapter—(1)the manufacturer or distributor immediately shall repurchase the vehicle or equipment at the price paid by the distributor or dealer, plus transportation charges and reasonable reimbursement of at least one percent a month of the price paid prorated from the date of notice of noncompliance or defect to the date of repurchase; or(2) if a vehicle, the manufacturer or distributor immediately shall give to the distributor or dealer at the manufacturer’s or distributor’s own expense, the part or equipment needed to make the vehicle comply with the standards or correct the defect.(b) Distributor or Dealer InstallationThe 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 or the defect is corrected.(c) Establishing Amount Due and Civil Actions.—The parties shall establish the value of installation and the amount of reimbursement under this section. If the parties do not agree, or if a manufacturer or distributor refuses to comply with subsection (a) or (b) of this section, the distributor or dealer purchasing the motor vehicle or motor vehicle equipment may bring a civil action. The action may be brought in a United States district court for the judicial district in which the manufacturer or distributor resides, is found, or has an agent, to recover damages, court costs, and a reasonable attorney’s fee. An action under this section must be brought not later than 3 years after the claim accrues.
RECALLS ON USED VEHICLES – Florida Law – Used Car – Recall Bill Compensation
Since August 1st, 2017 you are entitled to request payment on recalls, even those announced prior to July 1st. The new law entitles dealers to collect reimbursement, for your line-make used vehicles only, that are under an open recall and parts are not available for at least 30 days.
You can collect for July, 2017 and subsequent months, as long as you had the vehicle in your inventory, an open recall exists and no parts have been available for at least 30 days.
The bill applies to used vehicles in your line-make that you take in from customer trades or in off-lease programs only. For instance, Ford dealers who have used Ford vehicles in their inventory or acquire Ford vehicles in customer trades or off-lease programs.
After 30 days without the necessary remedy or parts you can submit for:
- 1.5% per month of average Black Book on recalls for which parts or repairs are not available, unless a national factory program pays more
- Payment begins on 31st day after recall notice or 31st day after vehicle enters inventory, whichever is later
In order to collect you will need to develop a submission which includes:
- Vehicle make, model, year, mileage, and VIN
- Date of the specific recall applicable to that used vehicle
- Date you acquired the vehicle – to determine the length of time for your reimbursement
- Date you sold this vehicle or the date you received the part or remedy from the manufacturer (unless that has not occurred as of the date of submission)
This law applies to all recalls on your line-make used vehicles unless a manufacturer issues a written statement to dealers that vehicles are okay to sell prior to recall repair.
SELLING USED VEHICLES WITH OPEN RECALLS
There is no federal law or state law that prevents you from selling used vehicles under open recalls. FADA recommends that you consult with your lawyer and consider using proper disclosures to your customers prior to the sale. FADA and Reynolds have produced two disclosure forms for dealers to use in connection with vehicles subject to an open recall, on for sales and one for service. Contact your Reynolds representative or Reynolds Regional Sales Director, Benoit Gadbois at (321) 297-8034 or email: [email protected]
Because many manufacturers prohibit what they call “selling warranty service” and some have prohibited advertising for recall repairs, the new law passed in 2017 prohibits a factory from denying your claim, reducing the amount of compensation or processing a charge-back when:
- You conduct a warranty or recall repair during the course of a separate repair requested by the customer
- You notify your customer of the need for a recall repair after a recall notice is issued
This video explains the process and accompanying excel spreadsheets to help you track for reimbursements.
*Reimbursement requests should be sent to: (1) the service rep and (2) the head of the region for each of the manufacturers that you have franchise agreements with.