Legal considerations for auto dealerships in New York

A tough winter and an overproduction of vehicles by many automakers created an unexpected glut in the new car market, igniting price wars with auto dealers and manufacturers in the U.S. this year. As snow and ice continue to pummel the East Coast, traffic through showrooms is slow and, in response, New York dealers are doing what they can to increase car sales.

Owning and operating any type of business in New York can be rewarding but, at the same time, very challenging. The auto dealership industry can be cutthroat and requires strict adherence to numerous commercial and real estate laws. Issues of financing and liens, leasing, transfers and title can keep an owner constantly wondering what new regulations or laws will be coming his or her way.

Watch out for illegal exports

Last year, the federal government began a crackdown of not-so-obvious export business models, claiming violations of customs laws and subjecting unsuspecting auto dealers to penalties. Some U.S. companies purchase new vehicles from dealerships and immediately turn around and sell those vehicles overseas for drastically marked-up prices. Federal authorities claim these illegal exports harm manufacturers and consumers in the U.S.

This is a problem for legitimate New York dealerships because penalties may apply if an auto sold overseas is traced to a U.S. dealership. Most manufacturers require dealers to verify that their customers are not immediately reselling new cars overseas, but when cars are purchased one at a time by an individual intent on deceiving the seller, it is difficult to ferret out illegal purchasers.

Remedies against manufacturers

With a decline in new car sales and the uncertain economy, there is no guarantee that auto manufacturers will maintain their past levels of production. Franchise contracts, while offering many protections, may not protect a dealer if a company decides to downsize or pull out of a particular geographical market.

Since 1956, the Automobile Dealers Day in Court Act allows franchise automobile dealers to bring lawsuits against manufacturers for failure to act in good faith regarding compliance with or renewal of franchise contracts. New York dealers are further protected from manufacturers by the Franchised Motor Vehicle Dealer Act, which allows them to bring legal actions for unfair business practices.

Consult a New York lawyer

If you own an auto dealership in New York, from the time of formation or purchase of your business, an experienced attorney is necessary. A lawyer knowledgeable about all aspects of dealerships can help with numerous issues including contracts, licensing and transfers.