Protecting Your Dealership Against Used Equipment Liability

Dealers are developing an increasing demand for used equipment.  At the same time, customers are on the hunt for that used equipment at a lower cost. Buying and selling used equipment can either be an added bonus to the dealership, or a core area of business. Regardless, dealers need to take into account the refurbishing and re-selling of equipment because serious liability can be exposed.

When used equipment is sold, the dealer who sold it becomes legally liable for the condition of the unit and if that equipment is involved in an accident or injury, the dealer can be held responsible.

The following are areas to be reviewed to help protect your dealership from potential lawsuits and poor business practices.

Sales Process Review
The sales process for new equipment includes the review of paperwork and the exchange of information, including operator manuals and warranty information. The same process should be included when going through the sale of used equipment. Be aware though that the typical “as is” contract doesn’t provide much legal protection these days. Various courts have held dealers liable for accidents caused by failure to equip used equipment with safety and operations information. To protect against liability, dealers should:

-Review or reinforce procedures that are currently in place for the dealerships used equipment sales.
-Confirm that all trade-ins are inspected properly before being put back on the market.
– Verify that all safety features and warning labels are in the proper place.
– Make any necessary repairs to the equipment before finishing the sale.
– Adjust the value of the unit if safety repairs are needed.
-Consult with legal counsel regarding sales procedures and protections.
-Consider only selling used equipment that has been properly inspected and brought up to the minimum manufacturer’s specifications.

Proper documentation and recordkeeping habits are critical to protecting your dealership. If a customer tries to file a lawsuit against you, what evidence would you produce to prove that you are not at fault? Proper recordkeeping can help you “make your case.” Some items to consider are:
-Complete a documented equipment safety checklist for each unit.
-Keep photographic evidence for each unit to show the condition before the final sale.
-Function test the unit so all operational aspects needing repair are identified.
-Make sure the operator’s manual is available to the unit being sold.
-Make appropriate upgrades to the equipment as required by the original manufacturer.

Don’t forget that accidents, injuries and fatalities are common from equipment operations. While a dealer’s insurance policy might pay up to the policy limits, in some cases the settlement costs exceed those limits leaving the dealer to pay the balance. The best protection is to address a problem before it happens.

For more information, please visit AEDNET.org.


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