Operating a used car dealership involves unique challenges and risks that require specific insurance coverage. Jason McConkey, the Director of Transportation at Central Insurance, recently shared valuable insights about the importance of having the right insurance for used car dealers. Whether running a small, independent dealership or a larger, multi-state operation, protecting your business from various risks is crucial.
Used car dealerships face a variety of potential issues. With a steady stream of customers, frequent test drives, and valuable vehicle inventory, these businesses can encounter significant liability and property risks. For instance, slip-and-fall accidents are common due to the mix of outdoor lots and showroom floors, which can become slippery. Regular maintenance, proper signage, and employee training can help reduce these risks.
Test drives are another area of concern. They are essential for sales but carry substantial liability risks. Dealerships can protect themselves by requiring valid driver’s licenses and proof of insurance before allowing test drives. Having employees accompany customers and using designated test routes can also minimize exposure to accidents.
Inventory damage is a significant risk as well. Outdoor lots can expose vehicles to weather, theft, and vandalism. Dealers can invest in covered storage, security cameras, and fencing to help mitigate these risks. Additionally, the fluctuating value of used cars can lead to gaps in insurance coverage. Regular inventory appraisals and adjusting coverage limits can ensure proper protection.
Environmental risks are also a concern, especially for dealerships that handle hazardous materials. Implementing compliant waste disposal programs can help avoid fines and liability claims.
McConkey points out that the size of a dealership doesn’t necessarily dictate its risk level. Both small and large dealerships can effectively manage risks with the right safety controls. Independent used car dealers often face additional challenges compared to franchise dealerships, which follow manufacturer guidelines. Independent dealers must establish their own policies to reduce risks and protect their assets.
To safeguard against financial losses, several types of insurance are essential for used car dealerships. General liability insurance protects against incidents on dealership property, while an auto dealers policy covers dealership-owned vehicles and test drives. Dealer’s physical damage coverage protects inventory from weather and criminal activity. Garagekeepers insurance covers customer vehicles left for repairs, and pollution liability insurance addresses environmental risks related to hazardous waste disposal. Finally, auto dealers extension coverage offers enhanced protection tailored to the unique needs of used car dealerships.
In addition to insurance, dealerships can adopt best practices to further reduce risks. Implementing physical security measures, establishing structured test drive procedures, and enforcing proper maintenance can all contribute to a safer dealership environment. Assessing weather risks and determining appropriate deductibles can also help protect inventory from severe weather damage.
Choosing the right insurance provider is critical. McConkey emphasizes the importance of finding a partner that understands the used car industry. At Central Insurance, the focus is on working with well-run operations, regardless of size, to help prevent claims and ensure long-term success. For those looking to protect their dealership, consulting with an agent can provide valuable guidance on the best insurance options available.