Every game has a set of rules, that if you ignore, can cost you a forfeiture, penalty, or getting banned from the game. Selling vehicles to the general public is no different. There are rules laid out on the National, State, and County & City levels in which your business operates. Having an unawareness of these rules never holds up in court.
The top things I see destroying dealerships are all related to financing. Just a reminder,
No OCCC Motor Vehicle Finance License = NO TAKING PAYMENTS.
If you are operating with only a GDN, the vehicle better be PAID IN FULL when it leaves the lot – if not, you WILL face penalties in the event of an audit. There is no minimum number of payments acceptable or legal. For example, you cannot take $2000 down on a $3000 vehicle and break the balance into 2 payments over the next 2 months (or 2 weeks for that matter). You also MAY NOT hold a title or plates as ransom for a balance owed. You have 21 days from the date of sale to title – no exceptions. If you break this rule – penalty will ensue. First at the courthouse then very likely followed by a complaint to TXDMV, explaining their side of the story. (After all, customers are far more savvy of their rights, thanks to the internet, and will no longer tolerate rule breakers.)
Your customer might also slam you and your business on social media following that DMV email. Depending on this specific customer’s influence, your business could majorly suffer. From there, you can expect an email/phone call and eventually, a DMV inspector who WILL crawl through your files looking for patterns of rule breaking. If a pattern is found, then the legal department steps in and the fines begin to accumulate.
That being said, let’s roll into the TOP 3 Myths that will hurt your Used Car Business.
When financing (with your proper licensure in place) and using a GPS (greatest TOOL in our arsenal)
Myth 1: “ My customer doesn’t have to know about the GPS unit”
Fact – Holders of seller-finance licenses must obtain signed disclosure/authorization forms when GPS-based devices are used. You must have a VIN SPECIFIC DISCLOSURE SIGNED BY THE CUSTOMER.
Michael W. Dunagan, TIADA General Counsel1, states:
- A provision of Texas law makes the placement of a “homing” device on vehicles without the vehicle owner’s permission a criminal offense (Sec. 16.06, Texas Penal Code). An argument could be made that a lienholder is an “owner,” but that argument isn’t consistent with Title Act definitions and references on Texas vehicle titles. While we haven’t seen any prosecutions of lienholders under this law, its mere existence is enough to make non-disclosure of GPS usage a risky enterprise.
- Also, the Office of Consumer Credit Commissioner has taken the position that holders of seller-finance licenses must obtain signed disclosure/authorization forms when GPS-based devices are used.
Myth 2: “I can repo the unit if they take it (GPS) out of the vehcle”.
Fact: You may repossess a unit for two reasons.
2. Not carrying proper insurance.
(Most contracts call for Full Coverage with a $500 Deductible)
Repossessing a vehicle because the customer removed the GPS unit will have the OCCC living at your office for the next month, searching through records for other illegal repossessions. If done habitually, (Patterns the OCCC will spot established in your records), it will cost a fortune in fines and possibly, the loss of ALL licensure.
Myth 3: “I can charge the customer for the GPS unit in the sale, after all, when he pays it off, I’ll just give it to him”
Fact: If the GPS Unit is charged to a sale, it is what we call a “LINE 4 item”
This is a product or service that we as Dealers, “Resell”
Extended warranties, service contracts, and VIN etching are the most common type of line 4 items sold. So, if you charge a customer for a GPS unit, it must be listed on the RIC. If you intend to also use GPS to securitize the collateral, then you must purchase (and disclose) a second GPS units on that vehicle by the time it leaves the lot; The GPS unit the customer purchased to track their new vehicle (which, by-the-way, you cannot have access to) and GPS unit for you to utilize.
Well fans, there you have it – 3 common myths to avoid while running your used car dealership. My specialty is training green peas (new dealers) and in the past 13 years have worked with over 1,700. I am just one guy (with a fantastic team) out there doing my best every day to liberate dealers from myths and misnomers that flourish in our industry. Remember, if you have any questions about your dealership, I offer consultations and we can review different aspects of your business and search for potential problems. Call us at 713-481-6712 or email at [email protected] to get started!
1 – Tiada.org Michael W. Dunagan TIADA General Counsel