Why Every Georgia Car Dealer Needs a Policies and Procures Handbook

Having a Policy and Procedure handbook can help avoid legal headaches. Here are a few things to consider before creating yours.

In the auto industry, the “reasonable person” standard is critical and can determine whether a car dealer is met with praise or legal headaches. Having a Policy and Procedure Handbook can help avoid said legal headaches, but there are a few things to understand before you jump into creating one.  This article explains defines a “reasonable person” by first explaining sophistication policies and due diligence.  Read on to learn more.

If you are more of an audio/visual type, click below to watch the YouTube version of this blog.

Sophistication Policies

When a consumer makes a dispute with a dealer, several factors need to be taken into consideration. There are sophistication policies, due diligence, and reasonableness. In most cases, there’s an evaluation made of the sophistication of the consumer versus the dealer.

Given how complex this can be to navigate, dealerships must have a Policies and Procedures manual that outlines inspections, pre-sale inspections, and policies for how the dealer prepares a car for sale. A Policies and Procedures manual makes it so a consumer can’t say, “Well, you should have found this” or “You should have known about this problem before selling me the car.” With a Policies and Procedures manual dictating how a dealer runs their business, the dealer can then say, “Look, we have these policies. This is our 26-point checklist, and that’s not one of those things so it’s not something that we would have found.” The other, slightly more complex, piece to this is due diligence and reasonableness.

Due Diligence

Due diligence is what we call the opportunity for the consumer to evaluate the vehicle, perhaps get it inspected, review a Carfax, test drive, or anything the consumer needs to do before buying a car. This is especially important in an as-is transaction because the consumer can’t always just rely on a car warranty to cover them because they won’t have a warranty in an as-is sale. This is why due diligence is so important for the protection of the consumer and the car dealer.

Reasonableness

What happens in lawsuits, in cases that are in court and litigation, cases boil down to the reasonable person. The truth is, none of us truly know exactly what a reasonable person is, because there isn’t one person that we can go ask and say, “You’re a reasonable person. How would you have handled this situation?” That’s something that a jury or a judge would interpret. A judge would interpret or determine this by asking themself: What would a reasonable consumer do in that situation? What would a reasonable consumer have known? What would a reasonable consumer have discovered?

For example, if a consumer buys a car and the bumper is missing from the car, or there’s a huge dent in a quarter panel or something like that, then it’s reasonable for the consumer to know that this car probably has some kind of accident history or at least a damage history that would cause a reasonable person to investigate. But if the car looks pristine and clean on the outside, is a reasonable consumer going to slide up under a car and look at it before they buy a car? No, probably not. Most reasonable consumers don’t go that far in their due diligence. Let’s say there’s a problem that a reasonable consumer would not have discovered, it’s very different than a problem that a reasonable consumer would have discovered.

What Should Car Dealers Do?

It’s important not only to have Policy and Procedure Handbook but to consider what a reasonable consumer does and treat the consumers as such. Approaching business this way, honestly and legally, consumers are more likely to trust you have their best interest in mind (and they will keep coming back in the future). Operating with Policies and Procedures and considering what a reasonable consumer would and would not know, can help prevent legal litigation and demand letters from opposing attorneys or consumers regarding an issue.