Recalled vehicles are increasingly landing on dealers' used-vehicle lots, but automakers aren't legally required to compensate them for lost revenue and extra expenses during what can be long waits for repair parts. Rick Jensen and other dealers are counting on state lawmakers to change that.
Even though stop-sales usually affect just a fraction of a dealership's used-car inventory, Jensen said, it is "frustrating" and costly.
"You can't sell them. Then, someone comes to do a trade-in for another vehicle, and you really don't want to do the trade-in," said Jensen, owner of Jensen Motors in New Ulm, Minn. "That's because you know you have to keep that trade on the lot while you wait for parts."
Federal law requires automakers to give dealers monthly payments equal to 1 percent of the value of any new car that can't be sold because of a recall. The money is compensation for depreciation and the costs of floorplanning, insurance and other expenses. But there is no law to address the problem on used vehicles under a stop-sale recall.
Now, many state dealers associations are pushing for legislation to make automakers pay dealers up to 1.75 percent of the value of each used car. That value would be determined by a reputable third-party used-car guide, and payments would be required whenever repairs are not possible within 15 days of a recall.
"Dealers need to be compensated for those vehicles that are recalled," said Craig Bickmore, executive director of New Car Dealers of Utah. "There is a formula for new vehicles, but used vehicles are not compensated for diminished value."
The Utah dealers association has proposed a bill to make automakers pay dealers 1.75 percent of the value of a used car after the 15-day window. That amount would be paid per month as long as a vehicle has a stop-sale on it.
The Automotive Trade Association Executives and the Association of Global Automakers devised the format that many states are using as a guide for their proposed legislation, Bickmore said.