Consumers have plenty of choices when it comes time to buy a used car – private sellers, independent used car lots and, of course, franchise dealerships. Each have their pros and cons, ranging from price, to quality, to reliability and safety. The one edge franchise dealerships may have over all other options is that consumers, in general, believe that a used vehicle at a franchise dealership has been inspected, is of good quality and will be safe.
In some cases, that customer may have been able to purchase that exact vehicle at a lower price from a private seller, or independent dealership. However, they chose to pay a little more for the peace of mind and the backing of a franchise dealer.
What happens when their perception of safety is eroded by the fact that the vehicle was sold to them with an open recall?
Recalls have long been top-of-mind for consumers. News sources, including TV, radio, newspapers and the Internet, regularly blast out messages of doom and gloom to consumers with each new recall – even those that only apply to a single vehicle, as manufacturers are now playing the “better safe than sorry” game.
Franchise dealers, who are also impacted by these recalls, make hard choices on how, when and if to sell used vehicles with open recalls to consumers. Often, it’s not financially feasible for a franchise dealership to simply sit on trade-ins, or other in-stock used vehicles with open recalls without risking the financial health of the dealership. So, even with the best intentions and full disclosure, many franchise dealers continue to sell these vehicles. The problem is that consumers come to the dealership with the assumption that purchasing a used vehicle comes with peace of mind and confidence that the vehicle is a safe and good quality vehicle. They then discover problems. What happens to that customer to erode their confidence in the buying experience with that franchise dealership?
The customer discovers that parts are unavailable and that they have to wait months to get their newly purchased vehicle repaired – and it is not even safe to drive – in the customer’s mind, they brought a dud from your dealership!
You can imagine the frustration they must feel, especially if they found out that you knowingly sold them the vehicle and may not have overtly disclosed the existence of an open recall. However, disclosing that a vehicle has an open recall also presents difficulties for the dealership. If you had taken the time to explain how the airbag is a recalled item that could in fact cause serious injury, and that a replacement airbag will not be available for months, the customer may have thought twice about completing that purchase. Still, when the customer learns about it after the fact, this just irritates them and they distrust your dealership -- even if you gave full disclosure.
There are many things that can go wrong with a used vehicle purchase. I’m certain that you can create a pretty long list. Most of those problems can be rectified. But recall repairs with no parts availability is the problem for which there is really no good solution, as yet. And the only person who will bear the brunt of that frustration is the dealership.
What’s a franchise dealership to do – a bit of a catch 22 dilemma, right? Once that vehicle is in your inventory, you’ve already limited your best options. The smartest decision is to proactively assess vehicles for open recalls at the time of valuation, either at trade-in or at auction prior to placing a bid. Doesn’t an open recall and its proper disclosure affect the consumer’s perception of safety and, subsequently, the sales price? Of course it does! If your franchise dealership is authorized to repair those open recalls you might elect to acquire a trade-in of a particular make versus a make where you have to secure a remedy from another dealership.
The bottom line is that your dealership should be running the VIN prior to purchase (or making an offer) so that you know what you are dealing with. You can get that info right from NHTSA.
Proposed legislation to prevent the sale of any used vehicles with an open recall is starting to take shape on both State and Federal levels. I think the industry would be wise to prepare for some new legislation coming down the pipeline in the not too distant future.
Recalls are such a pressing issue and there is enough confusion out there already with all the media reports and hype. Many consumers are already in a state of electrification. Personally, I believe that a vehicle with an open recall should not be sold until it has been properly repaired, I realize the huge challenge this presents, but there are longer term goals at stake and there are tools to assist. At the very least, your dealership should ensure that recalls are fully disclosed and make a strong attempt to ensure the consumer knows this before leaving your lot.
At the end of the day, effective management of recalls is not only the right thing to do, but the smartest.