Implementing dealer plate controls to mitigate auto dealership risk

Contract signing. Female customer sign papers

Occasionally, we run into situations where there seems to be misunderstanding surrounding the use of dealer plates. Many are under the impression that insurance follows the dealer plate, no matter which vehicle it is attached to, which is not always the case.

Dealer plates are for motor vehicle dealers to use on:

Passenger class vehicles or commercial vehicles that are owned by and part of the dealer’s inventory for sale.
A customer’s vehicle while it is under the care, custody, and control of the dealership — such as a service test drive.

Anyone authorized by the dealer may drive the vehicle with a dealer plate. Insurance will follow the dealer plate if a dealership employee is operating the vehicle while involved in an accident.

The following guidance outlines which vehicles may use a dealer plate and under what circumstances.

Acceptable:

Passenger class and light-duty commercial vehicles (vehicles with a gross vehicle weight rating of less than 3,400 kilograms) may be used with a dealer plate for personal use and/or if vehicles are “loaded with goods” of a private nature, for private use.

Unacceptable:

Dealer plates cannot be used on a commercial vehicle (vehicles with a gross vehicle weight rating of greater than 3,400 kilograms) for personal use or on a commercial vehicle that is transporting goods (for example, a parts truck). This means that authorized individuals associated with the dealership can use these vehicles for personal purposes and to transport private goods, as long as it complies with local laws and regulations.
Pickup trucks displaying dealer plates while being operated for private use may not tow another vehicle.
Dealer plates may not be used on an unsafe vehicle or on any vehicle that the dealer does not own. Dealer plates may be used on both “Fit” and “Unfit” status vehicles, as long as the vehicle is not unsafe to drive.

Dealer plate documentation best practices

The following documentation is needed when driving a vehicle with a dealer plate:

Proof of insurance (the insurance pink slip for the dealer plate)
Original or copy of the plate registration permit
Original or copy of the vehicle registration permit (if the vehicle has just been purchased and the registration permit is not yet available, carry a copy of the bill of sale to prove ownership of the vehicle)

Risk control recommendations

Do not place a dealer plate on any customer vehicle unless an employee of the dealership is physically in the unit.
When a dealer plate is placed on a customer vehicle, proof of insurance should be provided before the release of that vehicle.
Lending a dealer plate to a customer so they can register that vehicle at a later time is not recommended. The customer should be required to supply valid insurance and a registered plate on any purchases from the dealership.
Dealer plates should not be left hanging on vehicles while unattended. Once a test drive or use of the vehicle is complete, the dealer plate should be removed and properly secured inside the dealership.
All dealer plates should be stored out sight of the general public and should be locked away. Popular locations for the storage of dealer plates are inside electronic key machines, locked key rooms or in a locked file cabinet in a manager’s office or reception.
Use of dealer plates, when not individually assigned, should be formally logged/tracked in order to determine which dealer plate is in use, and when and who was in control.
A formal audit of all dealer plates should be completed on a daily basis in order to verify that none are misplaced, stolen, or inadvertently left on a vehicle.

It is important to keep in mind that any liability arising out the use or misuse of the dealer plates will be picked up by the dealership’s insurance policy. As such, it is best practice to limit the dealership’s exposure by adhering to these recommendations, as this will help to alleviate potential issues that can cost the dealership time and money in the event of an unforeseen incident. Although personal use of dealer plates is permitted under certain circumstances, it is advisable for dealers to minimize such practice as much as possible. Additionally, employees should limit their use of dealer plates outside of business hours and for personal purposes. It is recommended that management be informed and review any requests for personal use of dealer plates at all times.

As always, please contact your broker or Marsh Advisory representative if you have any questions or concerns.