Auto Dealer Monthly, September 2014

ON THE POINT that CarMaxs oft advertised 125 point safety inspection fails to determine whether there are active recalls on the cars they sell It was big story but it barely registered on the Richter scale Th e big earthquake is going to knock all of us out of our chairs GM has been hit with classaction lawsuits from car buyers in Texas and as of June California with both groups of plaintiff s claiming their vehicles have lost an average of 2600 in resale value Th e California case claims total damages in excess of 10 billion Shortly aft er the Texas suit was fi led our friends at Carfax piled on Th e vehicle history provider issued a report that stated in part that Texas is the No 1 state selling cars with open unrepaired recalls Carfax could have saved you the report seems to imply From whom I wonder Th e evil dealers Heres where it gets tricky For the time being these lawsuits are targeting the OEM Th e real danger is when the consumer attack attorneys turn to the dealers You are going to get hit no doubt Th e only question is when In most states there are specifi c laws against selling a new vehicle with an open recall Now following the CarMax example consumer groups are backing up and taking on the sellers of used vehicles as well In July 11 consumer groups submitted a false advertising complaint against CarMax with the FTC The groups say the retailers 125 point quality inspection fails to identify units with open recall issues Brace yourself Th e winds of litigation will blow through your town next Th ere will be signs First look for hastily enacted new laws covering loopholes identifi ed by the consumer groups I predict that in almost every state it will soon be illegal to sell a pre owned vehicle with an open recall Bear in mind that for most GM dealers a signifi cant number of their new units are grounded due to pending recalls Soon they will have to monitor all their preowned units on and off brand before they can move them 10 AUTO DEALER MONTHLY SEPTEMBER 2014 What if another manufacturer recalls a unit you have in stock You have to freeze that unit until the guilty OEM comes up with a fi x If youre like most dealers hanging on to a used car that depreciates weekly on your fl oorplan will kill you Worse yet should such a unit fi nd its way off your lot you could face the wrath of the consumer groups and gasp bureaucrats shouting dictums from their offi ces in Washington Is this situation political Have government agencies shown a tendency to punish opposition to unwelcome political agendas Bear in mind that in April of this year the Obama Administration proposed legislation banning the sale of pre owned vehicles nationwide with unrepaired open recalls I fi rst got wind of it in a Detroit News article then Th e New York Times and the national publications picked it off the newswires On July 30 New Yorks Department of Consumer Aff airs commissioner Julie Menin issued 200 subpoenas to New York City area dealers to provide records and documents on the sale of pre owned vehicles and what measures were taken to ensure the customers were notifi ed about any open recalls Th is is going to be huge Of course I see it as another government agency grandstanding and politicizing a situation to make headlines and make a grab at some undeserved revenue Th eyve got 800 dealers under the microscope and theyre making them jump through the hoops like circus animals PHOTO BY ILDAR SAGDEJEV GM HAS BEEN HIT WITH CLASS ACTION LAWSUITS FROM CAR BUYERS IN TEXAS AND CALIFORNIA WITH BOTH GROUPS OF PLAINTIFFS CLAIMING THEIR VEHICLES HAVE LOST AN AVERAGE OF 2600 IN RESALE VALUE