that it is not just big companies and government that are targets of hackers and other virtual malefactors. Bad guys target everyone, including car dealerships. Work with your computer vendor to make sure you have the latest in protection against cyber intrusion. Don’t forget the old-fashioned remedies, such as regularly changing passwords, guarding against employees sharing passwords or leaving them exposed, and limiting web surfing that leaves your system open to attack. Be especially careful with methods of payment. Dealers doing large transactions have been victimized by hackers who have taken residence in their systems to send false wire instructions for accounts that immediately get emptied. When doing deals, especially larger deals or deals involving multiple vehicles, do not accept payment instructions through the internet unless you call the person with whom you are doing business at a number you recognize to verify the instructions. Review your insurance policies to ensure that you have the proper coverage for cyberattacks and business interruptions. Recalls on New Vehicles Ground new vehicles with open recalls. Everyone knows this, but what is your procedure to make sure new vehicles with open recalls are not being delivered? Recalls on Used Vehicles in Your Inventory Fix the open recalls on used cars that you can. If there is not a fix or parts are not available, disclose the open recall to a buyer. There is no federal requirement to ground a used car with an open recall. Nevertheless, it is best practice to check the recall status of every used car in stock. Stop Sale Due to Recall on Sale of Used Vehicles If your franchisor issues a stop sale on used vehicles, pay attention to that. There is no federal law empowering a manufacturer to issue a used vehicle stop sale, but there can be consequences to your relationship with your franchisor if you disregard the mandate. Moreover, it exposes a dealer to great liability if the mandate is disregarded. Pay attention to it and seek compensation. Certain states, like Virginia, allow for compensation for stop sales on used vehicles. Open Recalls on Vehicles Brought in for Service Be sure you are checking the service vehicles of your brand for open recalls. The law requires that you notify service customers with vehicles of your brand of open recalls if your franchise requires that. Whether or not your franchisor requires that (increasingly factories say they do), it is a best practice to check for the open recall status on all vehicles of your brand brought in for service. If there is a recall affecting a vehicle of the brand you handle, repair it. This will provide business to your service department and avoid potential liability issues of selling a vehicle with a problem you could have remedied. If you cannot remedy an open recall because there is no fix or it is not a brand you sell, disclose that to a buyer. Supplier Agreements All dealers should do an audit of their supplier and vendor agreements, including DMS and insurance coverage. Have a detailed list of requirements and make sure the list is fulfilled. Think about how you may have to terminate your obligations and negotiate termination provisions for events like loss of a franchise or sale of a dealership. You want favorable terms in all your supplier agreements and do not want to get stuck with unnecessary, long-term supplier contracts that could have large termination costs for events like loss of a franchise or sale of a dealership. • Have a policy for review, approval and execution of supplier contracts. • For each contract, a dealer must ask why a lengthy term is required, and whether there is a benefit to the dealer. • Do not agree to lengthy contract terms unless there is a reason that benefits you. • Do not agree to automatic rollovers at the end of the term, except for month-to-month. • Make sure the state in which your dealership operates is the choice of law and venue for any actions between you and the supplier. • As dealers know, there are some suppliers who will not modify their form agreements. In that scenario, dealers need to determine what they can and cannot live with. If the supplier won’t modify the agreement, the dealer needs to assess what the supplier is providing and what the true downsides of the terms are and what that means for the dealership. Dealers should seek legal counsel should they be concerned or need guidance on the terms of supplier agreements. FRANCHISE RELATIONS As much as the franchisor relies on the dealer to get its cars on the road and fix the warranty issues from defective products, franchisors become bolder and more demanding of dealers year after year. Attack on the Franchise System In May 2025, the Alliance for Automotive Innovation, known to you as the Alliance, sent a letter to the Justice Department requesting that it examine franchise laws, specifically as it relates to add-points and warranty reimbursement. Like the Alliance, Scout, a wholly owned subsidiary of Volkswagen that is no different than Audi, also sent a letter requesting that the federal government intervene to get rid of state laws that ban direct-to-consumer sales. Essentially, the letters by the Alliance and Scout shared a common theme, that state franchise laws are archaic, unnecessary Continued from page 9 Continued on page 12 vada.com 11
RkJQdWJsaXNoZXIy MTg3NDExNQ==