Attention California Used Auto Dealers! You need to read this California Used Car Dealer Insurance Buyer’s Guide in its entirety. This is version 1.0 with future additions and improvements to follow.
The Car Buyer’s Bill of Rights affects wholesalers, auto brokers, and retail auto dealers across the state of California. Regardless of dealership size or license type, used car dealers often fall into the trap and pay dearly for it in the end.
The California Department of Motor Vehicles (DMV) has a variety of rules and regulations demanded of an individual seeking to obtain or renew a dealer license. A car dealer bond is required in the amount of $10,000 or $50,000 depending on the dealer type and sales volume. You would think that this extends over to auto dealer insurance also, right? WRONG!
No such insurance requirement exists so licensed used car dealers across the state never buy dealer insurance. This puts the public in harm’s way and creates dozens, if not hundreds, of unpaid claims annually. The nature of a used car dealer is to never waste money. Therefore, if the inspector is not asking for it, then there is no need to buy it.
At least 45% at any given time and as much as 60% when times get tough. There are hundreds of wholesalers across the state that think that their personal auto policy is going to extend to vehicles that they bought under their business license. These dealers are sorely mistaken! The rude awakening hits them when they read the exclusion section of their personal insurance policy and see the business purpose exclusion. This means that any claims that happen while operating your business autos will not be paid.
Make sure the wholesalers you are buying your inventory from have insurance. The dealers that don’t carry insurance are typically the ones with the worst loss history. This is a big reason why I developed the California Used Car Dealer Insurance Buyer’s Guide. To expose the loophole in the law and to bring clarity to a variety of dealer insurance-related questions.
Most producers do not specialize in Used Car Dealership Insurance nor have access to companies who write this insurance line. It is imperative you search around to find one who not only is knowledgeable with this product, but that is also prepared to build a policy that is specifically for your dealerships needs.
Experience matters and you get what you pay for when it comes to finding the most knowledgeable insurance producers to insurance your dealership needs. Deductibles, sub-limits, minimum limits, aggregate exposure, total insured value, prior damage. These are just a few of the most common terms that a well-informed insurance producer will understand and be able to explain to you in plain terms. If you are going to spend thousands of dollars on insurance every year, you should be getting your money’s worth!
New dealers (i.e. operations in business less than 36 months) generally provide a resume and/or experience questionnaire substantiating their experience in the garage automotive industry. In addition to industry experience, the insurance companies ask how much capital has been invested and other info that it typically contained in a business plan.
New Ventures will typically be surcharged 10 – 20%, depending on the rating plan of your insurance carrier. It makes sense since this segment of the industry creates the most insurance claims.
Get creative of how to utilize your insurance policy to set yourself apart from some of your competitors that may be offering similar vehicles for less. After all, a car dealer that doesn’t carry insurance is putting his customers in harms’ way from day one.
Loss runs are free of charge and they are reports provided by your insurance company that certify the claim activity on each of your policies.
1. Inventory Coverage – Includes purchase price and the reconditioning on your autos, but does not include expected profit. Example:
* It does not matter how much you were planning on selling that vehicle for since your “expected profit” is not covered.
2. Why every dealer needs Garagekeepers Coverage?
Garagekeepers Coverage is designed to protect you against claims arising out of physical damage to vehicles owned by others that are left in your care, custody, or control. This includes vehicles that are being serviced, repaired, stored, and test-driven.
3. How Medical Payments Coverage is useful even if I have medical insurance?
Medical Payments Coverage covers medical expenses sustained by you and/or your passengers if involved in an accident in a Covered Auto. It can also be used for small claims on your premises such as a trip and fall by a customer.
3) What is Scheduled Vehicle Coverage & why would I purchase it?
Scheduled Vehicle Coverage provides Liability and Physical Damage Coverage to vehicles specifically listed on your policy. This coverage should be considered when you own a personal vehicle in yours or your spouse’s personal name, rather than the business name.
In most cases, it makes most sense to dissolve your personal lines auto insurance policy that you carry through Geico or Progressive. Insuring those personal exposures under your car dealer policy can result in having more coverage for less money. The icing on the cake is being able to write off the cost as a legitimate business expense.
5) What is Contents Coverage & why would I purchase it?
Contents Coverage provides replacement cost for your personal property, including leased business personal property you have a contractual responsibility to insure in the event of a fire, burglary, vandalism, and collapse. Consider your computers, tools, furniture, fixtures, machinery and equipment.
Also known as a loss control or a loss prevention inspection. These in-depth inspections are scheduled and conducted generally within 30 days from your policy effective date. Inspectors write up an extensive report about your dealership and report back to the insurance company. The insurance company then compares the report to what’s disclosed on your application and looks for hazards threatening your business.
Inspections can help you save money on your dealership insurance and keep you and your employees safe. The fewer the hazards means you are less of a risk to the insurance company, which means your premiums could be lower. Remember, an inspection of your business for insurance purposes is nothing to be nervous about. If an inspector finds something that you need to fix to maintain your insurance rates, you’ll be given plenty of opportunity to do so before any action is taken.
The dealer must provide a written document with the price of specified items purchased and their effect on installment payments (California Civil Code §2982).
Used cars advertised as “certified” must meet specific requirements. The dealer must perform a complete inspection of the vehicle and provide consumers with a copy of the inspection report.
Dealers are prohibited from advertising a vehicle as “certified” if the:
If the dealer fails to comply with their legal obligations, please complete and mail a Record of Complaint Form (INV 172A) to the Department of Motor Vehicles at one of the addresses listed on the form. These are the rotten apples that spoil a bunch and have given this industry a bad name for decades. With that said, be prepared to have to prove your case to a DMV Investigator so you had better have your ducks in a row.
When possible, attempt to resolve the problem with the other party or firm. If unable to obtain a resolution, consider contacting a private attorney, the small claims division of your local county court, and a legal aid group for assistance. Refer to the County Government section of your local telephone directory for the county court in your area.
I’ve seen a need to clarify a variety of hundreds of situations and misunderstandings for dealers over the years. California used car dealer have always had tons of insurance questions that I hope to answer here. In addition, while I was attempting to be thorough without diving into too much detail, this Buyer’s Guide was designed to be exactly that…a guide. The California Department of Insurance and the California Department of Motor Vehicles websites should be referenced for more official information.
If you can appreciate the work that went goes into developing a document like the California Used Car Dealer Insurance Buyer’s Guide, let me know.
Let me know how we can improve the content for you.
I can go into as much detail as you folks would like to see. I just need the feedback from my dealer friends out there to kick me in the right direction on what information that would like me to include in future revisions or separate documents.
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