By Sean Reyes, Chief Marketing Officer, Recall Masters
Today’s automotive climate is undergoing quite of bit of turmoil. Between chip shortages leading to decreased new car inventory and used car prices skyrocketing for dealers and consumers, dealers still have to fight for every dollar they earn. In doing so, they are forced to gravitate to used vehicles out of necessity.
The lack of new car inventory isn’t all bad news for dealerships. Due to older vehicles in the market for a longer time, shop capacity is maxed out. Service departments are working overtime to service their customers while also reconditioning used inventory as quickly as possible to ready these vehicles for sale. Walk into any service department today and you’re going to witness the frantic pace technicians have to operate in. While on pace for another year of record-breaking revenue, service department staff are overwhelmed, which can lead to pushing open recalls to the back of the pile with a disclosure and promise to fix.
Off-brand dealers are in a harder spot as they have to rely on a competing dealership to fix any recalls, which results in a disclosure to the buyer and instructions to take their newly purchased vehicle to the branded dealership to get the recall fixed. It’s not the best introduction to a new customer, but vehicle safety comes first and it’s the right thing to do. It’s also the smartest thing to do, as your dealership is still legally liable under state product liability laws for selling any new or used car with an open recall. Recall disclosures only protect your dealership from state lemon laws, not product liability laws.
While it’s good news that recall completion percentages increased last year, the problem is an increasing number of recalls are announced daily. And the crux of the matter is that, as of right now, no law prohibits the sale of a used vehicle with an open safety recall.
Well, that could be about to change: Enter Jason Levine. Levine once held the position of executive director at the Center for Auto Safety. He left to become the acting director of the Office of Communications at the U.S. Consumer Product Safety Commission. He is an active voice in support of banning the sale of used cars with open safety recalls to consumers. His new position allows him even further authority and a voice in motivating the government to make this happen.
NBC News out of Washington reports that even the U.S. Government currently sells hundreds of vehicles with open safety recalls to a mostly uninformed public. The General Services Administration (GSA) has auction houses across the country where consumers can purchase cars directly. According to the NBC report, the GSA is simply offering disclosure to buyers. This appears to be in opposition to the recall compliance efforts manufacturers and dealers and currently encouraged to execute to ensure vehicles are safe to drive. Jason Levine was interviewed and stated, “Disclosure doesn’t fix the danger … generally speaking, when the government is selling you something, even if they’re disclosing it, there’s a general perception that it can’t be too dangerous.”
NBC News further reported that auction houses are selling hundreds of vehicles with serious open safety recalls which place drivers at risk. The National Highway Traffic Safety Administration (NHTSA) and the GSA are both government agencies. The former is charged with issuing safety recall notices and pushing manufacturers and dealers to increase recall compliance, while the latter is responsible for selling vehicles that are out of commission. It would seem that their current actions are at odds with their stated mission. Levine even called the GSA’s action of selling used vehicles with open safety recalls hypocritical.
Dealers are currently stuck between a rock and a hard place. There isn’t enough new inventory to sell at the moment. They have to sell used vehicles to keep the lights on. Used car inventory needs to turnover fast and dealers may not have the luxury of waiting for an open safety recall repair. That assumes “safety” is a “luxury”, which it is not. If our industry uses the current lack of inventory as an excuse to sell dangerous vehicles to consumers, then expect consumer backlash when inventory levels are restored.
That being said, legislation is floating around that will prevent the sale of used cars with open safety recalls. With proponents of this legislation now elevated into offices that directly influence policy, my guess is that we’re going to see this legislation move at a much faster pace. And dealers will have to figure out a way to adapt while still maintaining profitability.