6 Keys for Your Sales Staff to Prevent Surety Bond Claims

You can never be too cautious when it comes to claims

Getting surety bond claims is one of the major risks when running an auto dealership. Although your company might be executing its administrative and business operations diligently, claims are still possible. Training your salespeople to avoid potential pitfalls that can lead to them is essential, and can save you a lot of unnecessary trouble.

To stay away from claims, it’s important to understand how surety bonds work. Your dealership is usually required to post an auto dealer bond when getting licensed with your state authority. The bond functions as a guarantee for the state and its citizens that your dealership will follow the law. In this sense, it protects your customers.

If an affected party files a claim against you that gets proven, you are liable to compensate them up to the penal sum of the bond. Naturally, this means a huge financial setback for your business, as well as for your reputation.

Let’s look at the six most important guidelines that you need to pass on to your salespeople, so your business can stay away from unintentional violations.

1. Give space to customers

First things first: When your customers are selecting their vehicle, they need to have the mental space and enough time to make the right purchasing decision. Rushing and pressuring car buyers can be unpleasant, and is counterproductive.

Instead of embracing that common practice, it’s wiser to instruct your salespeople to show patience, even though they want to close as many sales as possible to reach their quotas. They should let customers examine all important details about the vehicle, for as long as they need. In this way, you can spare yourself the “pleasure” of frustrated buyers who are ready for a fight—and for a claim, because they are dissatisfied with the car they have been pressed to buy.

2. Be honest during the sales process

When buying a used car, customers want to know the previous owner and the car’s history, including any past damages. Title washing is a common malpractice, especially after flooding or other disasters. Vehicles may be transferred to other states, but records of title transfers are still available online, so buyers can easily check that.

Honest mistakes and lack of information are one thing, but intentionally hiding details about the car sale is certainly a legitimate reason for surety bond claims. The best course of action is to train your salespeople to be completely honest when selling a vehicle.

3. Provide financial clarity

One of the most common reasons for surety bond claims against auto dealers is fraud related to the financial details of car purchases. Often this is due to salespeople mixing four different elements when presenting the deal to customers: the actual car price, the trade-in value, the monthly payment, and the down payment for a vehicle.

Naturally, consumers can easily get overwhelmed by the different financial factors they need to consider. Leading them into a purchase without their full understanding of the purchase is definitely a good reason for a claim. That’s why instructing your salespeople to disclose all relevant financial details is a must for your buyers’ sake—and for your own safety.

4. Be careful about verbal warranties

An unexpected way to get a surety bond claim is because of verbal express warranty. If your salesperson promises a customer that a vehicle will last at least 10 years, in some states this can be considered a legally binding verbal warranty. In the worst-case scenario, if the vehicle breaks down sooner, your dealership will be in trouble.

To prevent this unfortunate series of events, it’s best to train your salespeople to be careful with the promises they make during the sales process. It can be tempting to pamper customers and paint a bright future for them, but warranty claims can be a real problem later on.

5. Have impeccable paperwork

Even if you have taken all the possible precautions, surety bond claims can occur because of frustrated customers or other misunderstandings. Although you can’t fully prevent those, you can make sure your paperwork is bulletproof so unreasonable claims can be easily discarded.

The best way to go is to train your salespeople to keep a thorough account of all correspondence with buyers, as well as any contracts, agreements, and other documents exchanged. In this way, you will know you’re able to defend yourself with full power if the need arises.

6. Provide legal training

This last tip goes hand in hand with the previous one—you can never be too cautious when it comes to claims. A good way to ensure your salespeople understand the gravity of claims and other legal issues is to offer them legal training.

The easiest and most cost-efficient way to do this is to organize internal educational sessions and workshops so that your employees are well-acquainted with all relevant state laws and regulations in the the automotive industry. Don’t forget to schedule this training on a regular basis so that your salespeople are kept up to date on any important legal changes.

Avoiding claims is a major must for auto dealerships, and knowing how to instruct your sales personnel is crucial for it. These six tips will help ensure your salespeople are properly trained and will help you can stay out of claim trouble.

What is your experience with surety bond claims? What are your top tips for training car salespeople to avoid them? Please share your insight in the comments section.

Vic Lance is the founder and president of Lance Surety Bond Associates. He is a surety bond expert who helps auto dealers get licensed and bonded. Vic graduated from Villanova University with a degree in business administration, and holds an MBA from the University of Michigan’s Ross School of Business.

Vic Lance


No comments!

There are no comments yet, but you can be first to comment this article.

Leave reply