Risk Management Strategies for Used Auto Dealers

In the used car business, profitability can depend heavily on managerial practices, marketing strategies, and effective risk management initiatives. Here are a few key things that dealerships need to do to safeguard their operations against risk.

Compliance

Many states have stringent regulations governing the sale of vehicles, and some states regulate dealerships’ contractual relationships with distributors. Consistent compliance with all applicable law is an integral element of used auto dealer risk management.

Inventory Loss or Damage

Insuring inventory against damage or theft is a critical security measure. Without this protection, dealerships may face tremendous losses.

Internal Theft

Dealers must have strong internal controls to prevent theft. Apart from the possibility of internal theft of a vehicle, misappropriation of company assets or embezzlement could undercut profitability. Dealers need to prioritize premises security elements such as camera systems and access controls. It is also advisable to establish systematic accounting controls and oversight.

Personnel Management Problems

Many salespeople work on a commission only basis. However, they may be legal employees of a dealership. Companies must care to prevent legal claims and be prepared to address them.

Ultimately, dealersships may have to contend with many different forms of risk. Their risk management plans must be commensurate with their scope of potential exposure to liability and loss.