Tennessee Motor Vehicle Dealers and Compliance with Public Chapter No. 306

Does the vehicle you want to purchase have an open recall? What about the vehicle you want to trade-in? “I recently heard about a huge open recall on several of this manufacturer’s models, is this vehicle a safe choice?” These are questions your customers might be asking themselves prior to purchasing a vehicle at your dealership.

As a dealer, you will want to know the same information. If you’re selling a vehicle you received on trade, you will need to check that the vehicle has no open recalls prior to completing the sale.

You have a vehicle that hasn’t sold in 65 days and you want to wholesale the vehicle. You can’t just line up your drivers and haul the vehicles to the auction without checking first, or you could have issues later. You need an easy way to run VINs and check for open campaigns on a daily or weekly basis.

Effective January 1, 2018, the State of Tennessee amended the Tennessee Code Annotated, Title 55, relative to vehicles adding Public Chapter No. 306, the Tennessee Motor Vehicle Recall and Disclosure Law. This law specifically addresses what Tennessee new and used vehicle dealers must do to comply by performing VIN searches in a recall database, when they may sell a vehicle with an open recall, additional paperwork required to be completed and signed by customers during the sales process, and documentation of repairs completed.

The law requires dealers to perform a recall database search within 48 hours prior to the sale of a used vehicle and to provide a copy of that recall database report to customers. If the report shows a used vehicle is subject to a stop-sale order or do-not-drive recall, the dealer may not sell the vehicle at retail until the repair associated with the stop-sale or do-not-drive has been completed.

If the recall database report indicates a used vehicle is subject to a manufacturer’s safety recall other than a stop-sale or do-not-drive, the dealer cannot sell the used vehicle until the repair has been completed.

There is an exception to this. If a used vehicle recall is not a stop-sale or a do-not-drive recall, the sale may occur if the dealer discloses the manufacturer’s safety recall by providing a copy of the recall database report to the consumer prior to the sale of the used vehicle AND if the consumer signs a disclosure document acknowledging the used vehicle has a manufacturer’s safety recall that has not been repaired. This disclosure document has strict guidelines and the customer may not waive compliance. If the customer does not sign the form, the used vehicle cannot be sold to them.

There are multiple websites and vendors selling software to assist dealers with compliance regarding recall database searches and consumer disclosure. National Highway Traffic Safety Administration (NHTSA) offers VIN search for recalls at https://www.nhtsa.gov/recalls. Another website powered by NHTSA is https://vinrcl.safercar.gov/vin/. General Motors offers their own website to check for recalls, https://my.gm.com/recalls. Tennessee Automotive Association (TAA) announced a strategic alliance with AutoAp, Inc. and recommended this vendor for their “industry-leading safety recall management solutions” to TAA member dealers to assist dealers with the compliance requirements of Public Chapter No. 306.

Dealerships may not get notice of open recalls before customers, and if they do, often they are not given sufficient parts to complete the recall for all their customers; parts are on back order or unavailable for 90-120 days. Manufacturers’ communications to customers may not clearly explain the timing and shortage leaving dealerships as the bearer of bad news.

Public Chapter No. 306 addresses manufacturers’ responsibilities to dealers by requiring manufacturers to not only compensate dealers for the labor and parts involved in the recall repairs, but also to compensate dealers unable to timely repair vehicles as it relates to retail used vehicle sales. “Timely” is a relative term, though. Under Public Chapter No. 306, “If parts or a remedy are not reasonably available to perform a recall service or repair on a used vehicle held for sale by a dealer authorized to sell and service new vehicles of the same line-make within 30 days of the manufacturer issuing the initial notice of recall, and NHTSA or the manufacturer has issued a stop-sale or do-no-drive order on the vehicle, the manufacturer shall compensate the dealer at a prorated rate of at least 1% of the value of the vehicle per month beginning the 31st day until the earlier of EITHER the dates the parts are made available OR the date the dealer sells, trades, or disposes of the used vehicle.”

The value to be used in the prorated calculation is average trade-in value as documented in an independent third-party guide for the year, make, and model of the used vehicle, i.e. BlackBook, NADA, or Edmunds. This option is available to new car dealers selling used vehicles of a similar make as authorized to sell by the manufacturer. See your specific manufacturer for reimbursement claims processing for any qualified vehicles and are “subject to the same limitations and requirements as a warranty and sales incentive reimbursement claim pursuant to the rules of the Tennessee motor vehicle commission.”

You need positive confirmation the used vehicle being sold does not have an open recall. Positive confirmation includes retention of the printed report from a recall database (NHTSA – www.safercar.gov or OEM) dated within 48 hours of sale and a signed disclosure from your retail buyer. You must also provide copies of both to your retail buyer. This is required on all retail sales of used vehicles.

Laurie Holt