Regulators Unveil Guidance On Best Practices For Internet Vehicle Sales

Acknowledging that “[c]onsumers are clamoring for the opportunity to purchase the vehicles of their choice online because it expands the options available and enables them to save a considerable amount of time and possibly money over traditional vehicle-buying methods,” the American Association of Motor Vehicle Administrators (AAMVA) recently released its much-anticipated guidance on Best Practices for the Regulation of Internet Vehicle Sales. In that guidance, the AAMVA recommends best practices for the regulation of internet vehicle sales involving licensed dealers, unlicensed dealers, and private-party sales, and warns that “[o]utdated or inconsistent regulation of vehicle sales can provide the opportunity for unlawful or criminal activities, may create unfair disadvantages for licensed dealers, or may cause financial harm to individuals and businesses.”

Most notably, the Best Practices recognize that “[a] growing percentage of vehicle sales are being conducted partially or completely over the internet,” so that a purchaser may never set foot in a dealership when buying a new car. Among the best practices for internet vehicle sales by licensed dealers, the AAMVA recommends that regulators maintain an easily-accessible and public list of licensed dealers in good standing; require internet vehicle dealers to provide proof to buyers that all prior liens or other financial encumbrances have been satisfied; allow electronic preservation of records to allow for easier access at the dealer's licensed location; and require dealers to register the websites they are using with regulators.

The Best Practices also recommend exemptingonline-only sellers from physical vehicle display area requirements, explaining in the accompanying notes that this would allowthese dealers to conduct business as a licensed dealer, from a location that is more conducive to their business model while still providing for consumer protection. Obviously, a licensed dealer who did not maintain a physical display area would incur significantly less overhead than a dealer who did offer a showroom. Consumers could benefit if those savings are passed on in the form of reduced retail prices, but there is a significant danger of free-riding by online-only sellers on the investment made by dealers with showrooms. The Best Practices add that this exemption would not apply toservice center requirements of jurisdictions or manufacturers required to satisfy vehicle warranty provisions...