The state of Texas requires every motor vehicle
driven on any roadway to be insured, including your
demos and all service vehicles owned by the dealership.
It is illegal to drive any motor vehicle in Texas
without proof of insurance or financial responsibility.
It is also illegal for any motor vehicle owner, such as
a licensed dealer, to allow anyone else to drive the owner's
vehicles, such as your demos, without insurance. Texas
Administrative Code Title 28 Part 1 Chapter 5 Subchapter
B
Before you purchase
any inventory to resell you must obtain an insurance
policy sometimes referred to as dealer insurance policy
or a dealer garage policy. Dealer insurance is a special
type of business insurance that is quite unique in that
it covers you when your customers are test driving your
vehicles, it covers you, or an employee driving a
vehicle back & forth from an auction, and it also covers
you if someone is injured while on your lot
Many insurance agents
do not sell dealer insurance. You might call your
insurance agent to find out if they carry dealer
insurance and if they do not, you will need to contact
an insurance agency that carries commercial insurance.
Be sure they can explain the type of coverage that would
be best for your dealership.
Dealer insurance
pricing normally depends on the location of your
dealership, your experience, and the number of dealer
license plates you possess. Dealer insurance can be
quite expensive, however, once you become established
and begin generating profits you will find that dealer
insurance is only a small part of your operational
expenses.
Types of Dealer
Insurance are
Dealer
Liability
Dealers Open Lot
Garage
Keepers
Errors &
Omissions
Employment
Practices
Workers
Compensation
False
Pretense
Dealer Liability or
Garage Liability
• If you
customer wrecks your demo into another vehicle, it will
cover the other vehicle, not your demo because it is
liability only
Dealers Open Lot
• Full
coverage for your inventory if your vehicles are damaged
by wind, natural disaster, and sometimes hail. It will
also cover you in cases of theft. Be sure to carry
enough coverage for your inventory
Garage Keepers
• Covers
vehicles that are owned by a customer that is leaving
their vehicle for repairs
Errors and Omissions
• Covers a
dealer that failed to comply with Federal Truth in
Lending Act, made an “error” in paperwork submitted to
MVD, failed to disclose prior damage, failed to perform
title search, etc.
Employment Practices
Liability
• Provides
coverage against sexual harassment lawsuits, wrongful
termination of an employee, wage payment disputes,
deprivation of career opportunity, discrimination, etc.
Workers Compensation
• Provides
coverage in case of work place injury to an employee. We
will cover workers compensation later in the course
False Pretense
• Covers a
dealer that purchases a vehicle from some that did not
have the legal selling rights, also covers when a person
purchases a vehicle from the dealer in a fraudulent
manor, for example using a stolen id
Any dealer in Texas
that does not maintain financial responsibility on
services vehicles, drives a demo or allows a customer to
drive a demo without financial responsibility, could
face penalties.
Not where do you find
dealer insurance, you will not log onto Progressive, or
Geico, you will not even be able to get an insurance
policy from your state farm agent, you might contact
your Current Insurance Agent, Ask Other Dealers, or do
an Internet Search
you might go to
google, type in Texas Dealer Insurance and as you can
see here, there are several companies that will assist
you with obtaining coverage for your inventory.
Retail Contract or
Bill of Sale
Every retail and
wholesale sale of a motor vehicle must be preceded by a
written contract that contains all of the agreements of
the parties an shall be signed by the buyer & the
seller.
If financing is
involved State law requires you have a Retail
Installment Contract which can be printed if using any
Dealer Management Software. If financing is not involved
you must have some type of written retail contract or
bill of sale.
The bill of sale
clarifies the terms of any motor vehicle transaction in
writing.
The bill of sale
should include the following:
• Date of
sale
• vehicle
description (i.e. year, make and model)
• vehicle
identification number (VIN)
• name and address of
person purchasing the vehicle
• sale price
• all other fees and
charges that are the total cost of the vehicle including
trade-in, pay-off of trade-in, extended warranty,
documentary fees, insurance, etc