8 Reasons Why Dealerships Face Lawsuit Losses


Dealerships Face Lawsuit Losses. All businesses come with certain risks, but when you are a car dealer you might face a very unique risk – LAWSUITS! Unfortunately, many dealers are losing legal battles, lots of money, time, and even their business due to false claims. Being aware of eight common ways dealerships get sued can help you protect your dealership and yourself from costly litigation.

1. Relying on Cookie-Cutter Documents

Many dealerships use common, cookie-cutter disclosures to disclose vehicle history and condition, and many times this paperwork has been found to be inefficient to stop false customer claims.

2. Unlicensed Mechanics

Having unlicensed mechanics working on the cars you advertise for sale makes your dealership even more vulnerable to lawsuits.

3. Untrained Staff

Untrained staff might break compliance procedures that might make your dealership an easy target for consumer lawyers.

4. Failure to Take Corrective Action

Being aware of a car defect and not taking corrective action to fix it could make your dealership liable. Defective parts should be replaced or fixed per industry standards and by licensed mechanics before selling the vehicle.

5. Not Disclosing Vehicle’s History and Condition

Not informing your customers of a known defect, important prior history, or condition regarding the car you’re advertising for sale puts your dealership at great risk, increasing the chance of losing a lawsuit.

6.  Avoiding State Laws

Avoiding State Laws in an effort to save money increases the likelihood of losing a lawsuit. You could end up paying much more in court.

7. Selling Unsafe Vehicles

Avoid selling vehicles that didn’t pass the required smog and safety inspections. Trying to cover the unpassed inspections, or trying to fix it yourself to be able to sell the unsafe vehicle can put you and your dealership in a difficult situation.

8. Misrepresenting Additional Services or Contracts

Avoid trying to convince your customers the vehicle you are selling must have additional products or services, such as GAP, GPS, or a service contract.

While no one can predict when a lawsuit might come, being proactive in your dealership’s policies and procedures can help you avoid many of the common issues that lead to litigation. Keeping up with new laws affecting used car sales is also critical; knowing what to expect will help you stay ahead of any potential problems. In addition, implementing compliance software like DealerXT is an important step in protecting yourself and your business.

If you would like to learn more on how to effectively protect your dealership from costly litigations, contact us at DealerXT  (408) 357-0237.