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Advertise in Compliance

with the Law

Most dealerships already use newspaper and Internet advertising as a primary source of marketing. Indeed, there are few marketing tools

which afford dealerships the same ability to “drive” consumers into their showrooms more successfully than newspaper and internet advertising. However, California laws rigidly regulate dealership advertising, and dealerships which elect to use these effective methods of marketing should be cognizant of these legal requirements.

Some of these laws are well-known throughout the industry. For example, you probably already know that any advertisement for a new or used vehicle must identify the vehicle by its model, model-year

and either its license number or that portion of its VIN that distinguishes it from all other vehicles of the same make, model and model-year. You are also likely aware that any advertisement which includes a specific vehicle’s price must include all of the purchaser’s costs at the time of sale, with the very

limited exceptions of taxes, registration, and a few other fees.

But, in addition to these well-known requirements, California law also includes some restrictions that may be less familiar. For example, many dealerships may not know the law imposes an obligation on them to withdraw any advertisement of a vehicle which has been sold within 48 hours of the vehicle’s sale.

As another example, the law prohibits claims in dealership advertising such as “we have the lowest prices in town,” or “we will beat any dealer’s price” unless the dealership has conducted a recent survey showing that it actually does sell its vehicles at lower prices than any other dealership in its trade area. Dealerships that run these types of advertisements touting their low prices must maintain records to substantiate these claims.

These are just a few examples of the myriad of laws governing dealership advertising. Although this type of marketing can be highly successful, dealerships may want to consider taking steps to insure they are compliant with the laws of this highly regulated activity.

The Single Document Rule continued from front page

the “Single Document Rule” requires and to train your personnel so that your dealership doesn’t run afoul of its provisions.

The Automobile Sales Finance Act requires that all of the terms concerning financing and the costs associated with the purchase of a vehicle be disclosed to the consumer in a single document. The Act actually sets out 18 separate items that must appear in that contract. The standard industry Retail Sales Installment Contract form makes provisions for all 18 of these items.

Problems can occur, however, when separate documents are used by dealerships which arguably alter the financial terms of the sale. Of course it is often necessary, if not prudent,

to use a separate form to explain to customers an aspect of the transaction they are entering into. For example, often dealerships have customers sign an “Acknowledgment of Re- Written Contract” form if the customer elects to re-write their contract because they could not obtain financing under the original terms. As long as this acknowledgment form merely informs the customer of the situation and does not effect or alter the terms of the re-negotiated sale, it should comply with “The Single Document Rule.” On the other hand, dealership personnel should never provide customers with any document (including handwritten notes) that contain terms not already included, as required, on the sales contract itself.

As a precaution, if you are contemplating the addition of any document for use in customer transactions, the most astute thing you can do is have your attorney review it first.


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