The Canadian Bar Association
Licensing

Meticulous record-keeping prudent for auto dealers

Automobile dealerships need to ensure they are extra diligent when it comes to creating and maintaining their paperwork, Toronto licensing and compliance lawyer Anar Dewshi tells AdvocateDaily.com.

Dewshi, principal of Dewshi Law Practice, advises dealers to write everything down, particularly the details of the deal. Sellers are required to disclose the vehicle’s past use, history and condition. So when a dealer communicates any facts that may affect a person's decision to buy, she suggests putting it in writing. That includes as-is vehicles.

The bill of sale should also reflect any disclosures that are made to the purchaser verbally.

“If it’s recorded, you have protected the client and yourself,” she says.

When it comes to trade-ins, the records must also detail any loans or liens on each vehicle.

All funds related to vehicle transactions, including deposits and cash, need to be documented, Dewshi adds.

The documentation involving extended warranties is another area that dealers have to be mindful of. But Dewshi says even more important than storing them is filing them on time.

Under the Motor Vehicle Dealership Act, dealers are required to file the requisite paperwork within seven days of a sale, but they often simply add them to their payment schedule, which usually occurs monthly, she says. That can put the purchaser at risk of not having the protection of the warranty available to them even though they bought it with the car.

“This is something that OMVIC enforces to protect the client,” says Dewshi. "Dealers have to change their systems to make sure they’re filing warranty paperwork within seven days.”

Dealerships must also keep records of their overall operations and finances. Record keeping practices must start from the very beginning.  For example, when a new dealer is launching a dealership, an owner might have several different sources of financing. Dewshi says they must be prepared to demonstrate where that money came from and have the relevant banking records on hand. That includes any agreements and repayment schedules that are attached to those loans.

“Many people won’t do that, but it’s very important to show the sources,” she says.

Dewshi says dealers are required to keep documents on-site and they should be easily accessible for review by the Ontario Motor Vehicle Industry Council (OMVIC).

“It’s a fairly simple thing to do,” says Dewshi. “And if you don’t do it, it’s a red flag for OMVIC.”

Records should include client files and bills of sale as well as relevant paperwork such as lease agreements, worksheets, invoices, safety certificates, financing documents, history reports and reconditioning records.

Any information related to finances is crucial to keep on hand in a way that is easy to access.

The dealer has to ensure it is following the regulations and that all the paperwork is in order. That also helps if there is an inspection, she says.

So in the event of an inspection or a request by the regulator for documents, Dewshi advises that the best practices include keeping those records handy and organized.

“The critical thing is that all the documentation has to be on-site at the dealership,” Dewshi says.

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