Legal Issues Relating to Selling Vehicles Other Than in the Showroom

Paul R. Norman | 04.06.20

Although the Governor’s ​“safer at home” order allows motor vehicle dealership sales departments to remain open as ​“essential businesses” during the coronavirus crisis, many dealers and their customers may wish to conduct sales transactions away from the showroom to minimize health risks. The two principal options to showroom sales are online sales and sales that take place at the customer’s home. 

Online sales are feasible, but care must be taken to follow the guidelines for making electronic pre-sale and for ensuring that customer electronic signatures are binding. If the transaction is conducted entirely on line except for delivery of the vehicle at the customer’s home, there should be no requirement that the customer be given a notice of the right to cancel the transaction within three days. 

On the other hand, sales transacted at a consumer’s home or another location other than the dealership may require that a ​“three-day cooling off” cancellation notice be given to the customer. Generally, there is no requirement to give a customer a three day cooling-off notice of cancellation if the transaction is initiated by the customer coming into the dealership or contacting the dealership by telephone, email or other means, including over the internet. However, if the dealership initiates the sale by face-to-face solicitation away from the dealership or by mail or telephone solicitation directed to the particular customer and the purchase contract is signed at the customer’s home or another location other than the dealership, the customer must be notified in writing that it has a right to cancel the transaction until midnight of the 3^rd day after the notice of cancellation is given. (Note: We understand that the Wisconsin DOT recommends that a three day cooling off notice be given in any transaction where the contract is not signed at the dealership, regardless of how it is initiated). An exception to the right to cancel exists if the customer determines that a three day delay in delivery of the vehicle will jeopardize the customer’s welfare, health or safety and the customer provides a separately dated and signed statement waiving the customer’s right to cancel within three days. 

Another concern with off-premises or on-line sales of vehicles arises under the dealer warranty provisions in the contracts governing the purchase of retail installment sales contracts or leases from dealers by certain lenders. There are some lender dealer agreements that contain a warranty that the customer signed the RISC or lease at the dealership premises. If an RISC or lease signed by the customer on-line or at a location other than the dealership is assigned to a lender having this particular warranty in their dealer agreemen, the lender could potentially use it to require the dealer to buyback the RISC or lease in the event of default or even in the absence of a default. Dealers should be aware of which lenders, if any, have such a warranty when assigning credit agreements not executed at the dealership.