Due to the unusual circumstances surrounding the COVID-19 Coronavirus pandemic (“COVID-19”), many industries are faced with unprecedented challenges – including the automobile sales industry. Fortunately, the California Department of Motor Vehicles (“DMV”) has recognized some of those challenges and provided a solution. Previously, an automobile dealer was required to conduct vehicle sales at the dealership’s licensed location absent certain exceptions. (Cal. Veh. Code§ 11714(b).) This made it difficult for dealers to conduct vehicle sales online in an ever-developing remotely accessible world. Due to COVID-19, even the DMV has become more flexible. (See DMV Occupational Licensing Industry News 2020-04 Online Vehicle Sales and Off-Site Delivery, https://www.dmv.ca.gov/portal/wcm/connect/1e65ec27-e678-4f78-8761-4c2c00d13478/20olin04.pdf?MOD=AJPERES&CVID= [“OLIN 2020-04”].)
Pre-Requisites for Online Vehicle Sales and Off-Site Delivery
While the DMV has relaxed some of its vehicle sale requirements, strict compliance remains in place regarding certain requirements for dealerships to take advantage of the new regulations. (OLIN 2020-04.) Most importantly, any dealership selling new or used vehicles on-site or online must possess a valid dealer license issued by the DMV. (Cal. Veh. Code§ 11701.) Similarly, the salesperson conducting the transaction must possess a valid salesperson license issued by the DMV. (Cal. Veh. Code§ 11800.) If one of these conditions is not met, vehicle sales, including online sales and off-site delivery, is not permitted. (Id.; OLIN 2020-04; Cal. Veh. Code§ 11701.)
Requirements for Online Vehicle Sales and Off-Site Delivery
The sale of a vehicle must still be completed at the dealership’s licensed location. In order to comply with this requirement when conducting sales online or delivering a vehicle off-site, there are a number of steps that a dealership must take, including: (1) all products, including optional products such as Guaranteed Asset Protection, must be contracted for sale prior to the delivery of the vehicle; (2) all terms of the transaction must be agreed upon by the parties prior to the delivery of the vehicle at an off-site location – negotiations may not be conducted at the off-site delivery location; (3) all contracts must be signed by the dealership before the delivery of the vehicle at the off-site location – only the purchaser may sign the contracts at the time of delivery; (4) a copy of all notices to the consumer required by the California Vehicle Codeand California Civil Codemust be provided to the purchaser before the purchaser executes all sales related documents, such as the notice of the right to inspection of the vehicle; (5) all Regulation Z disclosures must be provided to the purchaser and the purchaser must be given an opportunity to review such disclosures prior to the purchaser’s execution of sales related documents (see 12 C.F.R. Part 1026); and (6) most pertinent to COVID-19, social distancing requirements must be adhered to at the time of the delivery of the vehicle, including sanitation of the vehicle if a test drive is contemplated.
Conclusion
In short, a dealership cannot circumvent any term or disclosure related requirements when conducting a vehicle sale online and a delivery off-site. If anything, a dealership will likely be under more scrutiny when determining whether they complied with online sales and off-site delivery requirements. However, if you are concerned about these new rules, the attorneys at Madison Law are well-equipped to respond to any questions your business may have regarding compliance with the new DMV regulations.
