SALE OF VEHICLES UNDER STOP-SALE/RECALL

Federal law clearly prohibits dealers from selling new motor vehicles under an active recall or stop-sale order.

However, neither federal law nor Minnesota law expressly prohibits franchised dealers from selling used vehicles subject to a recall or stop-sale order. However, many manufacturer franchise agreements require dealers to follow any stop-sale or do-not-drive instructions the manufacturer issues. Dealers who sell a vehicle in violation of those instructions risk breaching their franchise agreements.

Fortunately, under Minn. Stat. § 80E.045, manufacturers must compensate franchised dealers for any same-line-make vehicle in their inventory that is subject to a recall and lacks available parts or a remedy within 30 days after the recall notice.

Specifically, a manufacturer shall compensate the dealer “at a prorated rate of at least 1.25 percent of the value of the vehicle per month beginning on the later of either the date that is 30 days after the date on which the stop-sale or do-not-drive order was provided to the dealer, or the date the vehicle was taken into the dealer’s used vehicle inventory, until the earlier of either of the following: (1) the date the recall or remedy parts are made available; or (2) the date the dealer sells, trades, or otherwise disposes of the affected used motor vehicle.

You may sell used vehicles from brands with which you do not have a franchise agreement. However, any used vehicle—regardless of brand—that is subject to a recall involving a serious safety risk should not be sold until the defect is remedied.

Before moving forward with the sale of a used vehicle under recall/stop-sale, you should confirm with your manufacturer representative whether they permit the sale of a recalled or stop-sale used vehicle and obtain that approval in writing. This step will help protect you if there is later a dispute over whether the sale complied with your franchise obligations.