Reports of excessive inventory seem to be everywhere. Sales have slowed, but manufacturer output has not followed suit. This presents opportunities for dealers to acquire vehicles that are hot sellers, and to gain sales and profits. It also presents the very real risk of vehicles stacking up not only on manufacturer lots, but also on dealer lots and on dealer floorplans.
In this environment, it is an appropriate time to revisit the protections provided by the Pennsylvania Board of Vehicles Act (“Act”) to dealers regarding new vehicle inventory.
First, the Act does not allow a manufacturer to force a dealer to purchase any new vehicle (this provision extends to parts and accessories as well). Rather, a new vehicle must be ordered voluntarily by the dealer. A manufacturer can encourage its dealers to purchase inventory, but it cannot force its dealers to do so. An exception to this is that a manufacturer can have a provision in its sales and service agreements requiring its dealers to “market a representative line of those vehicles which the manufacturer is publicly advertising.” When a manufacturer representative is pressuring a dealer to take excessive or unpopular inventory, the dealer has the right to say no.
Second, the Act does not allow a manufacturer to force a dealer to purchase a new vehicle with “special features, accessories or equipment not included in the list price of such vehicles as publicly advertised by the manufacturer or distributor.” A dealer can resist acquiring oddly configured vehicles.
Third, the Act does not allow a manufacturer to “delay, refuse or fail” to provide a dealer with a reasonable quantity of ordered new vehicles, taking into consideration the dealer’s facility and sales potential (this provision extends to parts and accessories as well). A dealer has the right to be provided with a reasonable inventory of new vehicles.
It can be challenging to resist manufacturer pressure to purchase excessive numbers of vehicles or unpopular vehicles. The Act provides protection in the form of a backstop against such aggressive manufacturer behavior. As the industry works through this period occasioned by unprecedented inventory levels, dealers should be extra diligent in monitoring new vehicle inventory and pushing back where a manufacturer is applying pressure on the dealer to maintain an inventory that is not consistent with reasonable business practices.