I recently saw a vehicle advertised on a dealer website that caught my attention. This pre-owned car was advertised as a “CarFax One Owner”.  Upon further investigation, I discovered that the “one owner” was a rental car company.

Even though the “one owner” statement may have been technically true, the description of the vehicle blew my mind: “With just one previous owner, who treated this vehicle like a member of the family, you'll really hit the jackpot when you drive home with this terrific car”.  (Now I know that Enterprise has been advertising lately that they are a “family company”, but I’m not sure that this is what they had in mind…).

I was intrigued by this statement, so I kept sniffing around. It turns out that the dealership is part of a large dealer group and I noticed that similar statements were advertised on prior rental vehicles in some of their other stores as well. For example:

“This 2010 Elantra is for Hyundai fans that are searching for that babied, one-owner creampuff.”

“From the looks of it, I'd say this car has been garage kept and babied regularly. If only my wife treated me as nice!!!”

So, are these statements just harmless puffery that is intended to make the vehicles stand out?  Perhaps, but I can’t help but speculate that representing that a rental car has been treated like a “member of the family”, “babied”, and “garage-kept” might not go over too well with an attorney general, judge or a customer who understandably thinks that “one owner” means one private owner.

Depending on the dealership, online advertising may be handled by any number of people such as a used car manager, internet manager, or perhaps an outside vendor. I realize that whoever wrote these ads may not have knowingly tried to deceive anyone. Perhaps they weren’t aware that the cars were rentals and just relied on the fact that CarFax identified the vehicles as “One Owner”. However, if an ad is deemed to be deceptive or misleading, an advertiser will likely have liability regardless of whether there was intent to deceive.  A dealer has the legal duty to investigate the accuracy of any statements made in advertising; therefore it is vital that anyone who is responsible for writing advertisements be well aware of advertising regulations.

Bear in mind that even though the dealerships will likely disclose the vehicles’ previous histories at some point, the dealer may still not be off the hook. Some advertising regulations indicate that if the first contact with a consumer is secured by deception, a violation may occur even though the true facts are made known to the buyer before he enters into the contract of purchase or lease.

It’s important to keep these concepts in mind when preparing an advertisement:

• Advertising is considered deceptive or misleading if “members of the public are likely to be deceived” or the advertisement has a “tendency or capacity to mislead the public”.

• Since statements and representations in advertisements are evaluated based on their tendency to deceive, no actual harm to consumers may need to occur for there to be a violation.

• The fact that others were, are, or will be engaged in like practices will not be considered a defense.

• Statements susceptible to both a misleading and a truthful interpretation will likely be construed to be deceptive.

• Puffery is defined as an advertising or sales presentation relying on exaggerations, opinions, and superlatives, with little or no credible evidence to support its vague claims. Puffery may be tolerated to an extent so long as it does not amount to misrepresentation (false claim of possessing certain positive attributes or of not possessing certain negative attributes).

The rules for good advertising are mostly common sense. Make sure your message is clear, truthful, easy to understand, and not subject to multiple interpretations. It’s not just about staying within legal guidelines either. Show your customers that you play by the rules – chances are they’ll thank you for it.

I recently saw a vehicle advertised on a dealer website that caught my attention. This pre-owned car was advertised as a “CarFax One Owner”.  Upon further investigation, I discovered that the “one owner” was a rental car company.

Even though the “one owner” statement may have been technically true, the description of the vehicle blew my mind: “With just one previous owner, who treated this vehicle like a member of the family, you'll really hit the jackpot when you drive home with this terrific car”.  (Now I know that Enterprise has been advertising lately that they are a “family company”, but I’m not sure that this is what they had in mind…).

I was intrigued by this statement, so I kept sniffing around. It turns out that the dealership is part of a large dealer group and I noticed that similar statements were advertised on prior rental vehicles in some of their other stores as well. For example:

“This 2010 Elantra is for Hyundai fans that are searching for that babied, one-owner creampuff.”

“From the looks of it, I'd say this car has been garage kept and babied regularly. If only my wife treated me as nice!!!”

So, are these statements just harmless puffery that is intended to make the vehicles stand out?  Perhaps, but I can’t help but speculate that representing that a rental car has been treated like a “member of the family”, “babied”, and “garage-kept” might not go over too well with an attorney general, judge or a customer who understandably thinks that “one owner” means one private owner.

Depending on the dealership, online advertising may be handled by any number of people such as a used car manager, internet manager, or perhaps an outside vendor. I realize that whoever wrote these ads may not have knowingly tried to deceive anyone. Perhaps they weren’t aware that the cars were rentals and just relied on the fact that CarFax identified the vehicles as “One Owner”. However, if an ad is deemed to be deceptive or misleading, an advertiser will likely have liability regardless of whether there was intent to deceive.  A dealer has the legal duty to investigate the accuracy of any statements made in advertising; therefore it is vital that anyone who is responsible for writing advertisements be well aware of advertising regulations.

Bear in mind that even though the dealerships will likely disclose the vehicles’ previous histories at some point, the dealer may still not be off the hook. Some advertising regulations indicate that if the first contact with a consumer is secured by deception, a violation may occur even though the true facts are made known to the buyer before he enters into the contract of purchase or lease.

It’s important to keep these concepts in mind when preparing an advertisement:

• Advertising is considered deceptive or misleading if “members of the public are likely to be deceived” or the advertisement has a “tendency or capacity to mislead the public”.

• Since statements and representations in advertisements are evaluated based on their tendency to deceive, no actual harm to consumers may need to occur for there to be a violation.

• The fact that others were, are, or will be engaged in like practices will not be considered a defense.

• Statements susceptible to both a misleading and a truthful interpretation will likely be construed to be deceptive.

• Puffery is defined as an advertising or sales presentation relying on exaggerations, opinions, and superlatives, with little or no credible evidence to support its vague claims. Puffery may be tolerated to an extent so long as it does not amount to misrepresentation (false claim of possessing certain positive attributes or of not possessing certain negative attributes).

The rules for good advertising are mostly common sense. Make sure your message is clear, truthful, easy to understand, and not subject to multiple interpretations. It’s not just about staying within legal guidelines either. Show your customers that you play by the rules – chances are they’ll thank you for it.

There are a number of good reasons for operating an ethical and legally compliant dealership, not the least of which is staying out of a courtroom.  Perhaps the most important - and most often overlooked - reason is increased customer satisfaction.  There are times when an employee may feel that he or she came out the winner by bending the rules a little, but what about the dealership’s reputation?  What about the customers who were mislead?  It seems like there might be some losers in the game.

Customers often make decisions during a vehicle sale transaction that they come to regret after the “ether has worn off”.  Perhaps they read the contract more carefully after they got home or showed it to a relative, friend, neighbor, etc.  The customer may notice some imperfections on the vehicle in the light of day and have it inspected by a mechanic or body shop or run a vehicle history report.  If there is a concern, some customers will let the dealer know while others will just chalk it up to (bad) experience.

Now, if the dealer is lucky enough to get a chance to rectify the customer’s concern, how will the complaint be handled?  Will it be “Sorry, all sales are final” or “You signed the contract”?

What about the customer that doesn’t bother to report the concern?  You can be sure they’re telling somebody about the transaction.  Or perhaps they’re telling thousands of people via social media?

Here are some examples of after-sale situations that can cause potential customer satisfaction nightmares:

• The customer sees your advertisement for a price lower than was charged for the vehicle.
• The customer discovers additional charges on the contract for items that he or she thought were included in the price of the vehicle.
• The customer discovers that F&I products were sold at much-higher-than-market prices.
• The customer discovers additional charges on the contract for items that he or she never agreed to purchase.
• The customer gets a call from the lender who asks for verification that the vehicle has a sunroof – and it doesn’t.
• The customer discovers that the price of the vehicle was raised to cover negative equity on the trade-in when after being told that the dealer agreed to purchase the trade-in for the full loan balance.
• The customer gets a call from the lender asking for verification of an income amount which is much higher than what was written on the credit application.
• The customer discovers that the vehicle purchased had undisclosed prior damage.
• The customer runs a vehicle history report and discovers that the vehicle purchased was an undisclosed previous rental, a prior demo, flood damaged, etc.
• The customer brings the vehicle in for repairs and discovers that the warranty or service contract coverage or term was misrepresented.

Sure, you made the deal. But is it really worth putting the reputation that you have worked years to build at risk? Take compliance and ethical behavior seriously.  A commitment to honesty and fair dealing will protect your company, your employees, your customers and, most importantly, your good name.

There are a number of good reasons for operating an ethical and legally compliant dealership, not the least of which is staying out of a courtroom.  Perhaps the most important - and most often overlooked - reason is increased customer satisfaction.  There are times when an employee may feel that he or she came out the winner by bending the rules a little, but what about the dealership’s reputation?  What about the customers who were mislead?  It seems like there might be some losers in the game.

Customers often make decisions during a vehicle sale transaction that they come to regret after the “ether has worn off”.  Perhaps they read the contract more carefully after they got home or showed it to a relative, friend, neighbor, etc.  The customer may notice some imperfections on the vehicle in the light of day and have it inspected by a mechanic or body shop or run a vehicle history report.  If there is a concern, some customers will let the dealer know while others will just chalk it up to (bad) experience.

Now, if the dealer is lucky enough to get a chance to rectify the customer’s concern, how will the complaint be handled?  Will it be “Sorry, all sales are final” or “You signed the contract”?

What about the customer that doesn’t bother to report the concern?  You can be sure they’re telling somebody about the transaction.  Or perhaps they’re telling thousands of people via social media?

Here are some examples of after-sale situations that can cause potential customer satisfaction nightmares:

• The customer sees your advertisement for a price lower than was charged for the vehicle.
• The customer discovers additional charges on the contract for items that he or she thought were included in the price of the vehicle.
• The customer discovers that F&I products were sold at much-higher-than-market prices.
• The customer discovers additional charges on the contract for items that he or she never agreed to purchase.
• The customer gets a call from the lender who asks for verification that the vehicle has a sunroof – and it doesn’t.
• The customer discovers that the price of the vehicle was raised to cover negative equity on the trade-in when after being told that the dealer agreed to purchase the trade-in for the full loan balance.
• The customer gets a call from the lender asking for verification of an income amount which is much higher than what was written on the credit application.
• The customer discovers that the vehicle purchased had undisclosed prior damage.
• The customer runs a vehicle history report and discovers that the vehicle purchased was an undisclosed previous rental, a prior demo, flood damaged, etc.
• The customer brings the vehicle in for repairs and discovers that the warranty or service contract coverage or term was misrepresented.

Sure, you made the deal. But is it really worth putting the reputation that you have worked years to build at risk? Take compliance and ethical behavior seriously.  A commitment to honesty and fair dealing will protect your company, your employees, your customers and, most importantly, your good name.

The new federal regulations that went into effect this year have added to the never-ending compliance requirements that dealerships have to deal with. Fortunately, most dealers have found that the Risk Based Pricing Notice and updated Privacy Notice requirements are pretty easy to handle. Utilizing the Credit Score Disclosure exception to Risk Based Pricing Notices and using the New Model Privacy Notices is relatively simple – just a few more forms to add to the pile. The Red Flags Rule is another story.

Red Flags regulations require a dealership to not only be a good citizen, but to be a cop as well. There’s no two ways about it, if red flags are detected during a credit transaction, certain proactive steps are required that will create extra work and slow down the deal process.

Many dealerships are utilizing automated Red Flags programs to help stay in compliance with the new regulations. These programs, such as those available through DealerTrack, RouteOne and the credit reporting services, are excellent and certainly make it easier to navigate the Red Flags Rule. The challenge begins when potential “red flags” are detected by these systems. Unfortunately, this is not an uncommon occurrence. Fraud or active duty alerts on credit bureaus, address discrepancies, multiple recent inquiries, or multiple new accounts recently opened are just a few of the situations that are considered to be identity theft “red flags”.

During compliance reviews in the last few months, we have been paying particular attention to how dealership employees are handling the new Red Flags requirements. Not surprisingly, we’re finding that in many instances when red flags are detected during a transaction, staff members are struggling with what to do next.

For instance, we’ve found a number of situations where the red flags program has prompted that a “high risk has been detected” and that “out of wallet questions are required”, but the questions have not been asked of the customer. While it can certainly be uncomfortable to ask a customer personal questions or request that they supply additional proof of identity or address, it is important that these steps not be avoided. If an identity theft does occur, and the system-recommended steps were not taken, it’s conceivable that the dealership’s exposure to liability will be increased dramatically. The same holds true in a situation where the dealer’s Red Flags procedures are audited by a regulator. Staff members’ proclamations that they had a ‘gut feeling’ that the customers were who they said they were will not likely be enough to satisfy the investigators. The fact that the employees were prompted to follow a particular procedure and failed to do so would almost certainly make matters much worse.

Training is a mandatory requirement of the FTC’s Red Flags Rule. Employees should be well-trained in all aspects of the company’s Identity Theft Protection Program and features of any automated Red Flags  systems, including the proper procedures necessary if Red Flags are detected. The training should explain the spirit of the law as well. It is important that staff members understand that the Red Flags Rule requires employees to be proactive in attempting to prevent identity theft and that any shortcuts taken in the process can create extreme liability to the dealership.

Even the best Red Flags program is not infallible. Chances are that an experienced identity thief will succeed despite a dealership’s best efforts. That’s okay. As long as the company can show that they have performed their due diligence and did not take any shortcuts, their exposure will likely be lessened dramatically.

The new federal regulations that went into effect this year have added to the never-ending compliance requirements that dealerships have to deal with. Fortunately, most dealers have found that the Risk Based Pricing Notice and updated Privacy Notice requirements are pretty easy to handle. Utilizing the Credit Score Disclosure exception to Risk Based Pricing Notices and using the New Model Privacy Notices is relatively simple – just a few more forms to add to the pile. The Red Flags Rule is another story.

Red Flags regulations require a dealership to not only be a good citizen, but to be a cop as well. There’s no two ways about it, if red flags are detected during a credit transaction, certain proactive steps are required that will create extra work and slow down the deal process.

Many dealerships are utilizing automated Red Flags programs to help stay in compliance with the new regulations. These programs, such as those available through DealerTrack, RouteOne and the credit reporting services, are excellent and certainly make it easier to navigate the Red Flags Rule. The challenge begins when potential “red flags” are detected by these systems. Unfortunately, this is not an uncommon occurrence. Fraud or active duty alerts on credit bureaus, address discrepancies, multiple recent inquiries, or multiple new accounts recently opened are just a few of the situations that are considered to be identity theft “red flags”.

During compliance reviews in the last few months, we have been paying particular attention to how dealership employees are handling the new Red Flags requirements. Not surprisingly, we’re finding that in many instances when red flags are detected during a transaction, staff members are struggling with what to do next.

For instance, we’ve found a number of situations where the red flags program has prompted that a “high risk has been detected” and that “out of wallet questions are required”, but the questions have not been asked of the customer. While it can certainly be uncomfortable to ask a customer personal questions or request that they supply additional proof of identity or address, it is important that these steps not be avoided. If an identity theft does occur, and the system-recommended steps were not taken, it’s conceivable that the dealership’s exposure to liability will be increased dramatically. The same holds true in a situation where the dealer’s Red Flags procedures are audited by a regulator. Staff members’ proclamations that they had a ‘gut feeling’ that the customers were who they said they were will not likely be enough to satisfy the investigators. The fact that the employees were prompted to follow a particular procedure and failed to do so would almost certainly make matters much worse.

Training is a mandatory requirement of the FTC’s Red Flags Rule. Employees should be well-trained in all aspects of the company’s Identity Theft Protection Program and features of any automated Red Flags  systems, including the proper procedures necessary if Red Flags are detected. The training should explain the spirit of the law as well. It is important that staff members understand that the Red Flags Rule requires employees to be proactive in attempting to prevent identity theft and that any shortcuts taken in the process can create extreme liability to the dealership.

Even the best Red Flags program is not infallible. Chances are that an experienced identity thief will succeed despite a dealership’s best efforts. That’s okay. As long as the company can show that they have performed their due diligence and did not take any shortcuts, their exposure will likely be lessened dramatically.

A recently filed lawsuit against an auto dealership accused a sales manager of sexual harassment and sexual battery against a salesperson. According to the complaint, the employee was harassed continuously over a ten day period and ultimately quit due to the alleged behavior.  The complaint further stated that the dealership should have known what was going on and tried to correct it.

The dealership responded that the claims have no merit, that it has a zero-tolerance harassment policy and that human resources was not contacted about the situation, as its employee handbook specifies.

I have no idea what the true merits of this particular case are, but it brings to mind what an uphill battle fighting these claims can be.

In some cases, employers may be considered to be “strictly liable” for sexual harassment, meaning that the employer is liable for harassment by an employee or other individual even if the employer did not know about the harassment or acted immediately to stop it. Fortunately, the Supreme Court has recognized a viable defense to this liability. If an employer can prove that it exercised reasonable care to prevent and promptly correct any sexually harassing behavior and the complaining employee unreasonably failed to take advantage of any preventative or corrective opportunities the employer provided or to otherwise avoid harm, the employer may avoid liability for unlawful harassment. Note however, where a supervisor’s harassment includes a tangible employment action (for example, firing the individual); this defense may not be used. An employer is always liable for harassment by a supervisor on a prohibited basis that culminates in a tangible employment action. The Supreme Court recognized that this result is appropriate because an employer acts through its supervisors, and a supervisor's undertaking of a tangible employment action constitutes an act of the employer.

The result in the this case may well come down to whether or not the court believes that the employer exercised “reasonable care” and that the employee “unreasonably” failed to take advantage of opportunities that the employer provided.

Most dealerships have an anti-harassment policy in place that they have all of their employees sign. That’s a great first step, but the questions remain: Have the employees actually read the policy and do they really understand it? Are they really aware of the procedures set forth in the policy to protect them from harassment?

If employees are trained on exactly what to do in the case of harassment (like who to report it to, and so forth) and fail to do so, the dealer will likely be in a better position to defend itself against a claim. On the other hand, if victims of harassment are uncertain about whom to report the harassment to within the company or worse yet, their claims are not taken seriously; they may feel their only recourse is to contact an attorney. That’s when it gets ugly.

The following procedures can be helpful in demonstrating that an employer has taken reasonable care in preventing or mitigating harassment:

• Preparing and adopting an anti-harassment policy and communicating the anti-harassment policies to all employees.
• Clearly communicating that harassment will not be tolerated and clearly explaining prohibited conduct.
• Creating a sexual harassment complaint procedure and explaining the employee’s obligation to report any conduct that may be viewed as harassing.
• Providing every employee with a copy of the harassment policy and complaint procedure, and redistributing it periodically.  The policy and complaint procedure should be written in a way that will be understood by all employees in the employer's workforce.
• Making the anti-harassment policy easily accessible via the company intranet, posters, employee handbooks and including it in the new-hire process.
• Providing sexual harassment training to all employees to ensure that they understand their rights and responsibilities.
• Taking any claim seriously and investigating it.
• Taking prompt and appropriate action.

Unfortunately, being a traditionally male-dominated industry, harassment claims against auto dealerships are not an uncommon occurrence. Having a policy in place and hanging posters may not be enough to adequately protect yourself.

A recently filed lawsuit against an auto dealership accused a sales manager of sexual harassment and sexual battery against a salesperson. According to the complaint, the employee was harassed continuously over a ten day period and ultimately quit due to the alleged behavior.  The complaint further stated that the dealership should have known what was going on and tried to correct it.

The dealership responded that the claims have no merit, that it has a zero-tolerance harassment policy and that human resources was not contacted about the situation, as its employee handbook specifies.

I have no idea what the true merits of this particular case are, but it brings to mind what an uphill battle fighting these claims can be.

In some cases, employers may be considered to be “strictly liable” for sexual harassment, meaning that the employer is liable for harassment by an employee or other individual even if the employer did not know about the harassment or acted immediately to stop it. Fortunately, the Supreme Court has recognized a viable defense to this liability. If an employer can prove that it exercised reasonable care to prevent and promptly correct any sexually harassing behavior and the complaining employee unreasonably failed to take advantage of any preventative or corrective opportunities the employer provided or to otherwise avoid harm, the employer may avoid liability for unlawful harassment. Note however, where a supervisor’s harassment includes a tangible employment action (for example, firing the individual); this defense may not be used. An employer is always liable for harassment by a supervisor on a prohibited basis that culminates in a tangible employment action. The Supreme Court recognized that this result is appropriate because an employer acts through its supervisors, and a supervisor's undertaking of a tangible employment action constitutes an act of the employer.

The result in the this case may well come down to whether or not the court believes that the employer exercised “reasonable care” and that the employee “unreasonably” failed to take advantage of opportunities that the employer provided.

Most dealerships have an anti-harassment policy in place that they have all of their employees sign. That’s a great first step, but the questions remain: Have the employees actually read the policy and do they really understand it? Are they really aware of the procedures set forth in the policy to protect them from harassment?

If employees are trained on exactly what to do in the case of harassment (like who to report it to, and so forth) and fail to do so, the dealer will likely be in a better position to defend itself against a claim. On the other hand, if victims of harassment are uncertain about whom to report the harassment to within the company or worse yet, their claims are not taken seriously; they may feel their only recourse is to contact an attorney. That’s when it gets ugly.

The following procedures can be helpful in demonstrating that an employer has taken reasonable care in preventing or mitigating harassment:

• Preparing and adopting an anti-harassment policy and communicating the anti-harassment policies to all employees.
• Clearly communicating that harassment will not be tolerated and clearly explaining prohibited conduct.
• Creating a sexual harassment complaint procedure and explaining the employee’s obligation to report any conduct that may be viewed as harassing.
• Providing every employee with a copy of the harassment policy and complaint procedure, and redistributing it periodically.  The policy and complaint procedure should be written in a way that will be understood by all employees in the employer's workforce.
• Making the anti-harassment policy easily accessible via the company intranet, posters, employee handbooks and including it in the new-hire process.
• Providing sexual harassment training to all employees to ensure that they understand their rights and responsibilities.
• Taking any claim seriously and investigating it.
• Taking prompt and appropriate action.

Unfortunately, being a traditionally male-dominated industry, harassment claims against auto dealerships are not an uncommon occurrence. Having a policy in place and hanging posters may not be enough to adequately protect yourself.

Much of what employees learn in the car business is from watching and listening to their co-workers. This type of education can be invaluable in many areas such as sales presentation, demonstration, and closing techniques. Of course, it can also lead to picking up bad habits like pre-qualifying customers by appearance or shortcutting the sales process.

An area that is frequently learned more by osmosis than by formal training is legal compliance.  Dealers often assume that their employees possess adequate regulatory know-how simply because they’ve been in the business for a while. But who taught them the rules? Have they been properly trained in compliance or are they just winging it? It’s important to realize that at some point in their career, many automotive professionals were taught the “old school” way of doing business. Some dealership practices they’ve learned are not necessarily legal or ethical but the employees simply rely on doing business the way it’s always been done. Many of these old school tactics are so common that employees don’t realize how risky they are:

Sales manager to salesperson: “Your customer has great credit but the bank is going to need more income. I don’t think they’ll ask for proof”.

Sales manager to finance manager: “Listen, these folks are in a hurry. Let’s make them mental owners. Just have them sign a contract real quick and we’ll get the rest of the paperwork done another time. If they leave without signing something, they won’t be back”.

Sales manager to salespeople: “Guys, that ad car is a big loser. Switch your customers to something else unless we can make a ton on the back end”.

Sales manager to finance manager: “Joe’s got this guy committed at $30 a month more then we need.  Let’s make some back-end money!”

Sales manager to salesperson: “We can probably get this guy done, but there’s going to be a big bank fee.  If he wants that Sentra, don’t mention the ad price. We need to sell it for a few grand more for the deal to make sense. He’ll be happy we can get him done”.

Sales manger to sales person:  “It looks like the negative equity is her hot button. Here’s what we’ll do: Tell her that we’ll pay off her trade and get her committed at $379 a month. I’ll just add the negative equity to the price.”

Finance manager to salesperson: “Let your customer know that the bank may call her and ask some questions. Make sure she tells them that the car is for her and not her brother!”

Finance manager to sales manager:  “I don’t care if you take a hold check for the downpayment, but the bank isn’t going to go for a deferred down, so we need to show it as cash on the contract.”

Finance manager to used car manager: “We’re over-advanced on that Tahoe deal. I need a book sheet for $15,500. Book it with premium wheels and sound.”

The vast majority of dealership employees are well-meaning, honest people, but assuming that they know everything they need to about compliance, especially in the current environment, is risky at best. When was the last time you had a comprehensive compliance check-up done? If it’s been a while (or never), now is the time. Once you have identified the areas that are in need of attention, the staff should be properly trained.  Education is a vital step towards protecting your business. After all, if employees don’t know or understand the rules, how can they be expected to follow them?

Chances are, you wouldn’t let someone drive your car unless you were certain that they knew how to drive. It makes sense to be just as careful when you’re handing them the keys to the dealership.

Much of what employees learn in the car business is from watching and listening to their co-workers. This type of education can be invaluable in many areas such as sales presentation, demonstration, and closing techniques. Of course, it can also lead to picking up bad habits like pre-qualifying customers by appearance or shortcutting the sales process.

An area that is frequently learned more by osmosis than by formal training is legal compliance.  Dealers often assume that their employees possess adequate regulatory know-how simply because they’ve been in the business for a while. But who taught them the rules? Have they been properly trained in compliance or are they just winging it? It’s important to realize that at some point in their career, many automotive professionals were taught the “old school” way of doing business. Some dealership practices they’ve learned are not necessarily legal or ethical but the employees simply rely on doing business the way it’s always been done. Many of these old school tactics are so common that employees don’t realize how risky they are:

Sales manager to salesperson: “Your customer has great credit but the bank is going to need more income. I don’t think they’ll ask for proof”.

Sales manager to finance manager: “Listen, these folks are in a hurry. Let’s make them mental owners. Just have them sign a contract real quick and we’ll get the rest of the paperwork done another time. If they leave without signing something, they won’t be back”.

Sales manager to salespeople: “Guys, that ad car is a big loser. Switch your customers to something else unless we can make a ton on the back end”.

Sales manager to finance manager: “Joe’s got this guy committed at $30 a month more then we need.  Let’s make some back-end money!”

Sales manager to salesperson: “We can probably get this guy done, but there’s going to be a big bank fee.  If he wants that Sentra, don’t mention the ad price. We need to sell it for a few grand more for the deal to make sense. He’ll be happy we can get him done”.

Sales manger to sales person:  “It looks like the negative equity is her hot button. Here’s what we’ll do: Tell her that we’ll pay off her trade and get her committed at $379 a month. I’ll just add the negative equity to the price.”

Finance manager to salesperson: “Let your customer know that the bank may call her and ask some questions. Make sure she tells them that the car is for her and not her brother!”

Finance manager to sales manager:  “I don’t care if you take a hold check for the downpayment, but the bank isn’t going to go for a deferred down, so we need to show it as cash on the contract.”

Finance manager to used car manager: “We’re over-advanced on that Tahoe deal. I need a book sheet for $15,500. Book it with premium wheels and sound.”

The vast majority of dealership employees are well-meaning, honest people, but assuming that they know everything they need to about compliance, especially in the current environment, is risky at best. When was the last time you had a comprehensive compliance check-up done? If it’s been a while (or never), now is the time. Once you have identified the areas that are in need of attention, the staff should be properly trained.  Education is a vital step towards protecting your business. After all, if employees don’t know or understand the rules, how can they be expected to follow them?

Chances are, you wouldn’t let someone drive your car unless you were certain that they knew how to drive. It makes sense to be just as careful when you’re handing them the keys to the dealership.