Resolve Recall Issues Before Selling Used Cars

Recent news articles warn consumers that many used cars for sale by dealers have uncompleted recall service work.

The source of these articles appears to be a press release from a vehicle-history report company claiming that it counted more than 2.7 million used vehicles for sale online in 2011 with safety-recall fixes that were never performed.

As a result of this publicity, many dealers are asking about their obligation to make sure that recall repairs are completed on the vehicles in their used-car lots.

For new cars, the answer is clear: Federal law prohibits the sale of a new vehicle with an open recall. If you are a franchised dealer with new vehicles in inventory subject to a recall, it is your obligation to make sure that you ground them until the recall repairs have been completed. It violates federal law to do otherwise.

But the recent focus has been on used cars. Is it legal to sell a used vehicle with an open recall? Applying federal law strictly, the answer is that it is not illegal to sell a used car with an open recall.

But that is hardly the best advice for running your dealership. It is risky and foolhardy to sell a used car with a recall that you know or should know is open.

A dealer who sells such a vehicle runs the risk of substantial liability if there is a post-sale accident that can be blamed on the retailer.

Note I didn’t say “caused” by the defect. A plaintiff’s attorney simply has to have an opening to argue to a jury that the selling dealership was negligent because it knew or should have known that it was selling a vehicle with a defect.

A liability lawyer also could argue that, if the defect is safety-related, the dealer violates product-liability law by putting the vehicle in the stream of commerce. That is especially the case if the used car was sold by a dealer franchised to sell new cars of the same brand.

A new-car dealership can check on the status of recalls on used vehicles of the brand it handles through the service histories available from its franchisor. That is why the National Highway Traffic Safety Admin. urges auto makers to “encourage” their dealers to check for open recalls on used vehicles in their inventories.

With today’s resources, new-car dealers selling used cars of a brand for which they are not franchised, as well as independent used-car retailers, also can check recall status.

A number of resources are available to help determine whether there is an open recall on a vehicle. Those include vehicle-history reports or websites such as www.safercar.gov.

Given this, any dealer must ask whether it is worth taking the risk of selling a used car with an open recall.

If it is a vehicle of the brand your new-car dealership sells, the franchisor will pay your service department to do the repairs. If you are a new-car dealer not franchised for the brand, or you are an independent dealer, you can take the vehicle to a local franchised dealer to have the recall repairs completed at the manufacturer’s expense.

Why risk liability when the auto maker will pay to solve the problem?

Michael Charapp is a lawyer who represents auto dealers. Based in McLean, VA, he is at (703) 564-0220 or [email protected].