The Basics: Virginia’s Car Dealership Laws
In Virginia, the laws governing car dealerships are primarily set forth in Title 46.2 (Motor Vehicles) of the Code of Virginia. Within this larger title, dealers and manufacturers are regulated primarily by Chapter 15. In addition to these Virginia statutes, federal laws also impact car dealerships in Virginia.
The Office of the Attorney General of Virginia, among other state executive agencies, regulates car dealerships and manufacturers. Car dealerships that specialize in the sale of used cars are exempt from regulation under Virginia law. Generally, only those sellers with five or more trade-ins in a single year, four or more vehicles for resale in a single year , and sellers who deal exclusively in motor vehicle sales are required to have a dealer license to conduct business in Virginia.
A dealer license is also generally required for transporting cars in Virginia. These licenses are issued by the Virginia Department of Motor Vehicles. To qualify for a license, you must be an individual or a company that conducts business at either a permanent or temporary location. Your premises must include space to display vehicles. You are usually required to have parts and equipment available and must provide a permanent telephone service.
The primary goal of Virginia law in regulating car dealerships is to protect consumers from unfair or deceptive practices in the sale, purchase and leasing of vehicles.
Licensing the Dealership
The licensing process for Virginia car dealerships is designed to ensure that these businesses comply with all state and federal consumer protection and tax guidelines. Three types of licenses must be obtained before doing business in the Commonwealth: Business License: Each car dealership must have a retail or wholesale business license. Retail and wholesale dealers have distinct legal requirements they must fulfill. Dealer’s License: To apply and receive a dealer’s license to operate a dealership in Virginia, owners must apply through DMV’s Dealer Licensing section. Like the business license requirement, dealer’s licenses are available only to retail or wholesale dealers. Sole proprietors must also obtain and present a certificate of fictitious name registration to obtain a Dealer’s License. Sole proprietorships must also obtain a certificate of fictitious name registration from the Clerk of the Circuit Court for the jurisdiction in which business is located. Once the paperwork is completed, certificates must be sent to DMV Licensing in Richmond. Dealer’s Registration: All licensed dealers in Virginia must obtain a Dealer’s Registration using the online service, FOCUS. Applicants must open an account and log into the system to complete an application. Dealer registration fees are determined by the number of employees and the type of business entity. All applicants for a dealer’s license must provide documentation of their premises; All applicants must show proof of insurance. Once the application process is complete and approved, dealers will receive their licenses and can then open for business.
Consumer Protection & Dealer Obligations
Certain consumer protection laws are applicable to car dealerships and car salespeople across Virginia. These laws govern warranties, disclosures, and like obligations that dealers owe their customers. In addition to the Virginia Consumer Protection Act ("VCPA"), these include the Virginia Dealer Ten-Day Warranty Act (Va. Code § 59.1-207), used car warranties (Va. Code § 46.2-1588), vehicle history disclosures (Va. Code § 46.2-1539.2), salvage vehicle title branding (Va. Code § 46.2-1609), certain such disclosures for vehicles with unrepaired safety recalls (Va. Code § 46.2-1609.3), odometer rollbacks (Va. Code § 18.2-186.1), and dealer failure to make motor vehicle replacement (Va. Code § 46.2-1577.1).
Most of these statutes’ are part of the Virginia Motor Vehicle Dealer Laws, Va. Code §§ 46.2-1500 et. seq. Like the VCPA, these statutes provide for the recovery of attorneys’ fees to the prevailing party where a consumer is successful pursuing a dealer’s violations.
A detailed discussion of each of these statutes is beyond the scope of this blog post. However, Virginia consumers who purchase a used vehicle from a dealer should know: Vehicle history reports, usually through Carfax or Autocheck, inform consumers whether vehicles have been in major impacts, fires, or "salvaged" or "flooded," or have odometer discrepancies. I encourage consumers to always request such a report on any used car before purchase and to be concerned where a dealer offers a vehicle for sale while refusing to disclose that history or obtain a report for the buyer.
Advertising & Pricing Laws for Dealers
In addition to the rules about dealer incentives and dealership financing in the previous section, Virginia law also has certain requirements for the pricing of vehicles. It is illegal to advertise a motor vehicle at an "inflated price." Any advertisement that identifies a vehicle for sale must either (1) identify the price being offered or (2) provide a specific means of finding out that price. This means either including a sticker on the vehicle itself or a sign nearby stating the price or adding the price to your advertisement in some other way. A dealer may not advertise a lower price unless it is a genuine cash price and one that can be obtained by all consumers, regardless of their credit histories or income levels. A dealer may not use terms like "total amount of credit" or "monthly payment" in offering vehicles for sale unless the dealer expressly and clearly states the terms clearly and conspicuously and that the price advertised is subject to credit approval and/or trade-in allowances that might substantially add to that price. If the dealer offers a "price reduction" from the MSRP or lists the vehicle with a "Retail Price Reduction," the comparison price must be the manufacturer’s suggested retail price (i.e. the MSRP). If the dealer claims to offer "price reductions" from the MSRP on a particular make or model of vehicle, then that dealer may not offer discounts of $500 or more off the MSRP of that vehicle for any customer with qualifying credit unless the dealer includes in its advertisement a statement of the number of vehicles available with those discounts. Finally, any time that the dealer holds sales using the phrase "manager’s special," "cancelled order," "price reduction," or similar phrases, the dealer must have at least five such vehicles of that nature available.
Lemon Law in Virginia
Virginia’s Lemon Law protects consumers when they buy a vehicle that has defects that do not affect its safety. In all other states, this is just like the Federal Magnuson-Moss Warranty act. Since Virginia does not allow suits to enforce the Federal Magnuson-Moss Warranty act, The Lemon law is the only remedy for Virginia residents facing Lemon law issues. This is another special burden placed on Virginia dealers.
If a new defective vehicle cannot be repaired after a reasonable number of attempts, it must be replaced or repurchased by the manufacturer or authorized dealer . The law also permits owners to seek other remedies for breach of warranty. A reasonable number of attempts is typically defined as four repair attempts or fifteen days out of service. If the defect affects the safety of the vehicle, the number of repair attempts is reduced to one repair attempt and 30 days out of service.
Virginia’s Lemon Law only covers vehicles purchased for personal or household use. There are no special provisions for small businesses, therefore Virginia dealers must treat small businesses no differently than normal consumers if asked to repurchase.
Other Compliance Issues
In addition to complying with the laws outlined above, car dealers in Virginia must also be aware of other compliance issues. For instance, the Environmental Protection Agency has regulation regarding the handling and disposal of waste oil, as well as discharge and storm water management. When disposing of waste oil, if by working with a licensed waste oil hauler, there are many record keeping requirements necessary to prove compliance, and if by retention, oil / water separators must be properly installed and serviced, in addition to special record keeping requirements. For many larger dealerships, permits may be required to discharge any water into local waste water systems and monitoring may be required to determine how much water is being used.
There are also risks of being involved in criminal activities. For instance, the Department of Motor Vehicles has the ability to issue you a criminal summons for allowing unlicensed or unbonded salespeople to sell for your dealership. State and Federal governments have laws and regulations concerning money laundering, and also have the ability to prosecute fraud.
Dealerships may also find that common law claims may be brought against the dealer as a result of mishandling a transaction. Bad acts may include: misrepresentation, trespass to chattels, conversion, libel, slander, intentional infliction of emotional distress, negligent infliction of emotional distress, interference with business expectancy, defamation, product liability, or negligent hiring/supervision.
Recent Law Changes & Updates
The sales process for vehicles through car dealerships is loaded with a lot of complications – enough to require states to pass extra ordinances and laws to regulate the interactions between the dealer and you, the consumer. Virginia is no exception. The following has recently been added to the laws which affect vehicle sales at dealerships in Virginia:
§ 46.2-1529.1 through 154. Sales Presentations.
§ 46.2-1544. Sales presentation after establishment of purchase agreement prohibited .
§ 46.2-1545. Vehicle brokering prohibited.
§ 46.2-1560 through 1562. Pre sale vehicle repair work and post sale repairs.
The purpose of these additions to the vehicle sales laws of Virginia is to protect you as the consumer from fraud while purchasing your vehicle at the dealership. A lot of the problems which the consumer can face often result from the fast paced, hyper-competitive nature of these salesman. These changes touch on some of the most common problems which consumers face.