Auto Dealer Ethics Stem from Early ABC Learning

DENVER – “Everything you need to know about auto dealership ethics, you learned in grade school,” says lawyer Eric Johnson, who carried a briefcase to kindergarten. (“I apparently was destined to be an attorney.”)

Riffing on the 1990 book “All I Really Needed to Know I Learned in Kindergarten,” Johnson says elementary school students are taught to show honesty, respect others (and themselves), follow the rules and take responsibility for their actions. 

Such behavior applies to adults in the business world, particularly car dealers, says Johnson, a member of the Hudson Cook law firm that specializes in dealership legal issues.

“Every dealer should have a code of ethics,” he says at an industry conference put on by a Facebook group, Ethical F&I Managers. “It should be posted, read and signed by every employee.”

eric johnson

Being good for goodness’ sake is important, but there are other reasons, Johnson says, citing them:

Most of today’s dealerships are exemplars of fair business practices and transparency. It wasn’t always that way.

A lingering negative stereotype is rooted in dealerships that took advantage of customers through disreputable practices such baits and switches, payment packing and falsely telling customers they must buy extended service agreements as a requirement to obtain vehicle financing.

There remain a few bad apples in auto retailing, but they are considered industry outcasts and risk finding themselves the target of stricter law enforcement.

Fast and loose employees may initially post impressive numbers “but eventually they will create havoc,” says Johnson, who is from a dealership family and worked at a dealership while in college.

Pay plans should be reasonable but not so high as to encourage bad behavior, he says. “There’s a sweet spot.”     

He recommends ongoing training online and in-house for both veteran and new employees. He also advocates issuing penalties for rule violations and conversely awarding compliance certificates to reputable employees.

Today’s dealerships cannot afford to do otherwise, he says. “Rogue employees need to be disciplined and possibly dismissed.”

If there is something worse than not having a code of ethics, it is having one and ignoring it, Johnson says. “If that happens, a plaintiff’s attorney will say it’s a misrepresentation. I’ve seen it happen.”