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Manufacturer Per Car Incentive Programs

By: W. Kirby Bissell

Manufacturer Per Car Incentive Programs

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Incentive programs, always a point of contention between manufacturers and dealers, are perhaps becoming even more creative, at least with some brands.  These programs vary widely in scope, purpose, and criteria. But, almost all states have statutes providing certain guidelines that such programs must meet as well as protection for dealers from overly-coercive programs.  Note, though, that the protections offered by statutes vary from state to state and the explanation below will not be applicable to all states.

Generally, Manufacturers may offer per car incentive programs throughout the country without violating federal or state law.  However, the validity of the programs in application varies by state. State statutes attempt to strike a balance between manufacturers’ desires to implement creative incentive programs to meet their ends and dealers’ ability to avoid being coerced into overly-expensive or onerous requirements to earn incentives and remain competitive.

First, almost universally throughout the country, if a manufacturer offers a per car incentive to any dealer in the state, it must offer the same program to every dealer in the state.  Generally, statutes require that manufacturers cannot discriminate in the prices they charge to dealers in a state for new motor vehicles – however, per car incentive programs, offered to all dealers, are a distinct exception to this general rule.

Second, many per car incentive programs are tied specifically to dealer facility upgrades or image requirements.  Many state statutes speak specifically to such “facility-related incentive programs,” but their content varies greatly throughout the country.  For example, in Florida, facility-related per car incentive programs are legal as long as dealers that do not participate in the facility-related requirements are still offered a reasonable percentage of the full amount of per car incentives available.  Alternatively, in Oregon, facility-related per car incentive programs are also legal, but if a dealer undergoes the required facility upgrades, they cannot thereafter be required to materially alter the upgraded facility for seven years.  Facility-related per car incentive programs are a constant point of contention between manufacturers and dealers, but many states have statutes that can provide some protection.

Third, many per car incentive programs also include sales and/or customer service performance requirements.  Oftentimes, manufacturers evaluate dealer compliance with these performance metrics on a national basis. However, some states, like Florida, require that manufacturers consider all relevant local and regional market criteria when evaluating dealer performance.  National comparisons or averages do not always include such an evaluation. Thus, if certain unique local market circumstances are hindering your dealership’s performance, state statutes may offer you some relief from unfair sales and/or customer service performance metrics.

Finally, many per car incentive programs also use customer surveys to evaluate qualification.  Some state statutes govern the survey process too. For example, Florida requires any survey evaluation included in a performance measure be based on a statistically significant and valid random sample.  This is another area that manufacturer incentive programs are oftentimes lacking.

In summary, manufacturer per car incentive programs continue to proliferate throughout the United States.  However, each program is unique and nuanced. Similarly, state statutes vary widely throughout the country.  But, if your dealership is experiencing difficulty due to failing to or not fully qualifying for a manufacturer incentive program, it may be worth having an experienced automobile franchise attorney evaluate the incentive program and its compliance with myriad state statutes in your locality.