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Dealers face legal probe on licensing violations

Dealers have been warned to stop illegally retaining ownership as ‘keeper’ for three months of new cars sold to customers, so as to qualify for carmakers’ bonuses.

Under the Supply of New Cars Order 2000, dealers can be paid bonuses if they register stock to be used as demonstrators, but the cars must be retained for three months.

Dealers say they are under great pressure from some manufacturers to take packages of cars – some they know they can sell, some less appealing. The attraction is carmaker bonuses to increase registrations in slow sales months.

The Office of Fair Trading wrote to all UK car manufacturers and importers following a meeting in April with the Driver and Vehicle Licensing Agency.

Police forces, concerned about confusion over the lawful owners of cars involved in crimes and accidents, are putting the DVLA under pressure to ensure car ownership records are accurate.

Dealers breaking the three-month rule on pre-registered stock are under threat of suspension from the secure forms scheme (V55/2, AFRL and AFRL-web), which would add to their administrative costs and could delay deliveries to customers.

In an email to committee members this month, Alistair Manson, operational head of the RMI’s National Franchised Dealers Association, warned that the DVLA is determined to stop dealers that fail to notify change of ownership of pre-registered cars.

The DVLA says breaking the three-month rule “infringes the licensing and registration regulations and is illegal”. It claims that this practice has been brought to the attention of the police.

Earlier this year, Manson told the DVLA it should raise the matter with the SMMT, as he understood some manufacturers were “actively encouraging” the concept via ‘try and buy’ campaigns.

In a letter to carmakers, the OFT says such vehicles would fall within the definition of pre-registered if sold to an end user, and would not qualify for bonuses or incentives. Both dealers and purchasers would be “in breach of the law”, it adds.

AM was passed a copy of Manson’s email, which states: “Any further cases of alleged abuse brought to their attention by the police will be investigated with a view to implementing the sanctions.”

This week, Manson says: “It is impossible to know how widespread this practice is. It was introduced in an attempt to stamp out the practice of manufacturers paying dealers bonuses for taking unwanted stock.”

An SMMT spokesman says: “We would be concerned about any illegal activity in the industry. Manufacturers carry out regular dealer audits and retailers would be called to account for any discrepancy.”

A Ford spokesman says its policy is to claw back money from dealers who have wrongfully claimed an incentive in respect of a pre-registered car. “These appear to be isolated cases and, despite robust checks, it is impossible to achieve a 100% foolproof system of compliance,” he adds.

Asked whether Ford would mind if all dealer and manufacturer pre-registrations were published, the spokesman says: “If industry consultation produced a consensus that was adopted, Ford would not stand in the way of such a change.”

#AM_ART_SPLIT# July pre-registered vehicles worth £3.35m

Under the Supply of New Cars Order of September 2000, manufacturers must publish (through SMMT) their total of pre-registrations for each month, with the gross revenue.

In July, Vauxhall pre-registered 97 cars (worth £864,214), Ford 75 (£703,910) and Renault 74 (£524,915). The month’s total was 361 cars: total revenue £3,351,074.

The New Cars Order contains this definition of pre-registered:

“A new car which a supplier or dealer has caused to be registered before the terms and conditions of its supply to an end-user have been agreed.” Exclusions include “a car retained for a period of at least three months.”

The Order also states: “It shall be unlawful for a supplier to give any preferences to any dealer on the ground of the number of new cars which are pre-registered by the dealer for a specified period.”

It adds that preference means treating a dealer more favourably than another dealer with regard to credit, discounts, bonuses “or other matters”, or “times or methods of delivery or other matters arising in the execution of the dealer agreement”.

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