Since launching AutoAp in 2014, our team has had thousands of conversations with auto dealers about how vehicle safety recalls affect their profits and liability.
Most dealers assume that since manufacturers are sharing recall data with the government, there is a fail-safe system in place to update dealers about recalls and limit their liability.
Unfortunately, those dealers think they are covered, but are decidedly not. The automotive recall ecosystem is badly broken and with dealers on the front lines, they often are unknowingly setting themselves up for trouble.
The conversation typically starts with dealers confidently saying they regularly fix vehicles with open recalls and they get a steady flow of recall information from the manufacturer.
Then we pull VINs from their inventory. Almost always, it is a sobering experience for dealers. At any given time, 20% of all vehicles on the road have an open recall. It’s not uncommon for the AutoAp team to find 25% to 30% of a dealer’s inventory with one or more open recalls.
How does this happen? You’d think there would be a seamless transition from the manufacturer to NHTSA, and dealers would get constant updates on vehicle recalls. Unfortunately, there are several factors keeping this from happening:
- NHTSA’s VIN-specific lookup site, SaferCar.gov, often fails to report on open recalls.
- NHTSA’s year, make and model data base often contains errors assigning recalls to incorrect models and years.
- Vehicle history reports regularly miss recall data.
- OEM published data often can be confusing, even to the most experienced service managers.
- There also are frequent timing delays from the manufacturer announcement of a recall to when NHTSA actually publishes information and, surprisingly, even when the OEM tells dealers. The AutoAp team recently reviewed 100 different recalls and found on average they had a 16-day delay from a manufacturer’s announcement to NHTSA publishing.
Finally, while it is illegal to sell a new vehicle with an open recall, it is not illegal for a fleet or rental car company to remarket its vehicle inventory even with existing recalls, although in some states, disclosures on recalled used vehicles are required.
The result? Dealers often go to the auction and buy vehicles with open recalls. Even if they check a VHR or SaferCar.gov, there is a significant chance that a given vehicle’s open recall won’t be properly identified. The dealer now is unknowingly bringing a vehicle back to the lot with an open recall. If it has a Stop Sale on it or No Remedy Available, the dealer not only has increased liability but also will lose money on it – or have to wholesale after finding out.
Another common scenario: Dealers take an off-brand vehicle for a trade-in. Because they don’t communicate with that brand’s manufacturer, they could easily miss an open recall on that vehicle.
These omissions can have dangerous consequences. We talked to a dealer a few months ago who was sure he was compliant and all his recalls were taken care of. About a month later, he called back to confide he’d just heard from a customer whose brakes failed, and their minivan was T-boned rolling through a red light. Upon further review, the vehicle had an open safety recall that hadn’t been published at the time of the sale.
Fortunately, the customer and their family walked away from the accident. Nevertheless, the dealer was shaken to the core. What if something tragic had resulted? The dealer said he never wanted to put another customer at risk like that again.
What can dealers do to protect themselves?
- The first step is to develop a written recall management policy. Train your employees on the policy and have them sign it.
- Make sure there is one point person with the ability and authority to implement the policy. If you have multiple stores, this can still be just one person.
- Next, thoroughly understand the liability impacts and understand how safety recall liability directly relates to your dealership.
- Automate the recall-finding process. Manual processes = missed recalls = higher liability and lost profit and revenue opportunities.
- Finally, understand the financial and liability aspects of how recalls impact your overall bottom line and pose risks to customers. It is possible to both increase revenue and decrease liability by fully understanding the recall management process. They are two sides of the same coin.
If you want to increase your profits and are sincere about protecting your customers, your dealership and its reputation, developing a systematic approach will help you not only avoid risks but also benefit from recalls through more service work and improved relationships with existing customers.
Mark Paul is CEO of AutoAp, which compiles statistics about vehicle safety recalls and their impact on automotive dealers.