When was the last time you reviewed your dealership’s indirect finance and lease agreements? If you’re struggling to remember, you’re not alone. Many dealers sign these agreements without a second thought, assuming that because they involve banks and finance sources, they must be standard. However, with increasing interest rates and rising consumer defaults, it’s more important than ever to scrutinize these contracts and negotiate where possible. Partner with Charapp & Weiss for expert legal advice on automotive leasing and financing.
Key Considerations in Your Agreements
Indirect finance and lease agreements govern how your dealership assigns retail installment sales contracts (RISCs) and leases to finance sources. While these agreements facilitate funding, they also include terms that could impact your business significantly. Here are some of the most critical areas dealers need to review.
- Dealer Reserve – Are the terms of your dealer reserve agreements clear? Does the agreement allow for chargebacks, or have you negotiated a split reserve to avoid future deductions?
- Customer Insurance – Does your agreement require you to guarantee a customer’s insurance for a specific term? Instead, ensure you’re only responsible for verifying coverage at the time of delivery.
- Spot Delivery – Many agreements include warranties that the contract was assigned before delivery. Since spot deliveries are common, make sure your agreement doesn’t set you up for a buyback demand.
- Perfection of Liens – Ensure your agreement aligns with federal bankruptcy laws, which allow 30 days for lien perfection, rather than outdated 20-day requirements.
- Voluntary Protection Products – Are there restrictions on selling voluntary protection products? Ensure your dealership has the flexibility to offer its standard protection options.
- Recourse for Complaints – Some agreements require dealers to repurchase contracts if customers file complaints. Ideally, buyback rights should only apply if the dealer loses a legal dispute.
- Credit Card Down Payments – Does your agreement allow credit card down payments? Some agreements still prohibit them, which could create compliance issues.
- Legal Jurisdiction and Venue – Ensure that any disputes must be resolved in your dealership’s state and county, not in a distant or unfavorable jurisdiction.
- Arbitration and Attorney Fees – If arbitration is required, make sure it’s fair and held locally. Attorney fees should be awarded to the prevailing party, not just the finance source.
- Data Ownership and Protection – Ensure that your dealership retains ownership of customer data and that finance sources follow FTC safeguards for protecting consumer information.
To simplify this process, Charapp & Weiss has provided an Indirect Finance and Lease Agreement Checklist in the latest newsletter. Dealership owners, managers, and legal teams should use this tool to review agreements carefully before signing.
Social Media: A Double-Edged Sword for Dealerships
Social media is a powerful marketing tool, but it comes with risks—especially when employees post dealership-related content. Even well-intended posts can lead to legal trouble if they violate advertising laws or mislead consumers.
Why Social Media Posts Matter
Salespeople often post offers, promotions, and testimonials on platforms like Facebook, Instagram, and Google. If these posts contain misleading information, violate state or federal advertising laws, or omit important disclaimers, your dealership could face regulatory action or lawsuits.
How to Protect Your Dealership
- Create a Written Social Media Policy – This should outline what employees can and cannot post on behalf of the dealership.
- Ensure Compliance with Advertising Laws – All promotions must include necessary disclaimers and qualifying information.
- Monitor Employee Social Media Activity – Designate someone to review dealership-related posts for compliance.
- Restrict the Use of Personal Accounts for Business – Employees should only post on dealership-managed social media accounts.
- Obtain Customer Consent for Photos and Testimonials – A formal release form should be required before posting any customer images.
Charapp & Weiss provides a Consent to Use of Name, Testimonial, and/or Image form to ensure dealerships have legal permission to use customer content in their marketing.
Take Action Now
Protecting your dealership means being proactive. Review your indirect finance and lease agreements, implement a solid social media policy, and ensure compliance with advertising laws. Charapp & Weiss is here to help dealers navigate these complex issues and avoid costly pitfalls.
