The COVID-19 Stay at Home Executive Order, especially the early stages when customers needed appointments to enter dealership showrooms, prompted many dealers to try to accommodate their customers by pivoting to a remote sales process where possible. Although remote sales are a good way to practice social distancing while selling vehicles, remote sales involve some important differences from typical in-showroom sales to keep in mind.
If you sell a vehicle on-line and deliver it to the customer, it is vital to make it clear that your dealership is the point of sale, not the customer’s driveway, so that you don’t inadvertently change the applicable sales tax jurisdiction and also so you avoid accidentally triggering 3-day cooling off rights for the customer. If the customer lives in another sales tax jurisdiction, even one with the same tax rate as your dealership, changing the taxable point of sale means that the local portion of the sales tax will get allocated to the wrong taxing body. If the customer lives in a jurisdiction with a higher sales tax rate, under-collection of sales tax will compound the problem. (By the way, similar consideration of sales tax jurisdiction should be applied to off-site “tent sales”). The Federal Trade Commission’s (FTC) 3-day cooling off period to return merchandise applies to sales made at a person’s residence, such as door-to-door sales. Three-day cooling off rights do not arise when customers come into your dealership to purchase vehicles. However, if significant selling activity moves from the dealership to a customer’s residence during the course of an online sale, the 3-day cooling off rule could come into play, potentially creating a right for the customer to cancel the sale.
There are several steps that you can take to show that an online sale with delivery to the customer’s residence was conducted at your dealership.
- Agree to all terms of the sale prior to delivery. If you negotiate the transaction online, but then the delivery person sells an extended warranty in the customer’s driveway, you have changed the material terms of the sale, which pushes you toward the danger zone. In fact, it is a good practice to have somebody other than your sales staff deliver vehicles that are sold online or over the telephone to make a clean break between sales and delivery activities.
- If the transaction involves a trade-in appraisal, try to inspect the vehicle remotely or send an employee out to appraise the trade-in before you finalize the terms of the deal, if possible. If you cannot appraise the trade-in before delivering the new vehicle to the customer and the trade-in does not live up to the customer’s description, requiring you to adjust the trade allowance, pause the deal and renegotiate remotely, not on the spot.
- Sign as many of the sales documents as possible online. If time permits, arrange to have signed copies of documents that require a “wet ink” signature mailed or shipped to your dealership before you deliver the customer’s vehicle. Documents that require a “wet ink” signature include the motor vehicle title application, the certificate of title assignment area, the power of attorney, odometer statement, and sales tax return.
- Deliver RISC in advance (or be prepared to give the customer time to read it before signing) to ensure compliance with Truth in Lending Act disclosures.
- Consider having the customer sign an acknowledgement that the dealership did not solicit or negotiate the sale at the customer’s home and that delivery was made as an accommodation to the customer.
- Consider requiring customers to come to the dealership for test drives. Bringing a vehicle to the customer’s home for a test drive could be seen as initiating the negotiation process and raise three-day cooling off concerns.
- When you deliver the customer’s new vehicle, make sure to follow IADA’s Operation Recommendations for Dealerships (available at illinoisdealers.com) or other best practices for sanitizing the vehicle (and the keys) before you hand it over to the customer, and practice safe social distancing, including the use of masks, when interacting with the customer.
A word about security is in order. You will want to be thorough with your identity theft Red Flags compliance to be certain that your customer is who he or she claims to be, especially if the customer requests delivery at a location other than the home address listed on the customer’s proof of identity. Consider asking some out of wallet questions to verify identity. Also, if you are transmitting a customer’s private, personal information electronically (credit application, copy of driver’s license, any document with the customer’s social security number or other personal information, etc.), make sure that you are using a secure and encrypted method of transmitting that information. What is and isn’t a secure method of electronic transmission is beyond the scope of this article, but your DMS or other vendor should be able to provide secure, encrypted means of transmission, whereas texting images to your salesperson’s personal cell phone is risky at best. Conferring with your IT provider is highly recommended.
Even though technology and state regulators are not fully immersed in the digital age, by using a bit of caution, remote sales are a way to fill the needs of your customers.
By Illinois Automobile Dealer Association