agent Entrepreneur logo
MenuMENU
SearchSEARCH

Recalled Cars Create A Costly Problem for U.S. Auto Dealers

Honda Motor Co’s order that its U.S. dealers stop selling some 2.2 million of the automakers’ most popular models is compounding financial and regulatory headaches for car dealers stuck with millions of vehicles that have potentially hazardous air bags or other safety defects, reports Reuters.  With the recalls affecting Honda vehicles dating back several years, used-car ... Read More »

February 9, 2016
3 min to read


Honda Motor Co’s order that its U.S. dealers stop selling some 2.2 million of the automakers’ most popular models is compounding financial and regulatory headaches for car dealers stuck with millions of vehicles that have potentially hazardous air bags or other safety defects, reports Reuters

With the recalls affecting Honda vehicles dating back several years, used-car dealers are facing increased pressure. It is legal under federal law to sell used cars with unrepaired safety defects that are subject to recall, but dealers that operate under franchises with manufacturers could be violating those agreements.

Ad Loading...

It is illegal to sell new cars that are subject to a recall under federal law.

Because some used-car dealers operate independently of any manufacturer, the growing number of used cars that need safety repairs is creating divisions among dealers. The National Highway Traffic Safety Administration says this difference creates a “safety loophole.”

John Isaacson, a Honda dealer in Auburn, Maine, said he was hit by three recalls the same day, but would respect Honda’s ban. “If people are selling these with open recalls, customers get mad,” Isaacson told Reuters. “Over time, it’s not good for business.”

Regulators have taken steps to address sales of used cars subject to safety recalls.

In a settlement last month with General Motors Co and two dealer groups, the Federal Trade Commission warned automakers and dealers not to claim that used vehicles sold as “certified pre-owned” cars had undergone comprehensive inspections if repairs required under a recall had not been done.

Ad Loading...

“Companies touting the comprehensiveness of their vehicle inspections need to be straight with consumers about safety-related recalls,” Jessica Rich, director of the FTC’s Bureau of Consumer Protection, said in a statement.

As in Honda’s case, manufacturers sometimes issue a “stop sale” on models subject to recall and can penalize their franchise dealers if they sell such cars.

The head of the California New Car Dealers Association, Brian Maas, said one of his members had 15 percent of his inventory affected by the Honda recall.

However, dealers outside the new vehicle franchise system, whether independents or chains such as CarMax, the largest U.S. used-car retailer, can sell such cars.

AutoNation Inc, the largest new vehicle dealer group in the United States, has said it will not sell a new or used vehicle that needed repairs under a recall, and Chief Executive Mike Jackson is calling on rivals to do likewise.

Ad Loading...

In the meantime, Jackson told Reuters, the policy is proving costly, in part because the chain has to stock more vehicles to make up for the roughly 16 percent of inventory it cannot sell.

AutoNation, with its huge network of dealerships, can “afford to do the right thing,” said Kelley Blue Book analyst Rebecca Lindland. Smaller dealers need to turn cars quickly and cannot afford dead inventory.

Honda has said parts to repair the Takata airbags will not be ready until late summer.

CarMax says it is transparent about recalls on its used cars, including a link on each car’s listing on the website to search for open recalls. Carmakers do not allow CarMax to perform recall repairs, so customers are “best positioned” to get repairs at franchised dealers after purchase, the company says.

More Industry

Photo of two men in suit jackets shaking hands next to new car inside of a dealership
IndustryApril 23, 2026

A New Consumer Culture in the Auto Dealership

Dealers should aim to build a positive work environment, helping employees execute an efficient experience, from their online research to the final delivery of the vehicle.

Read More →
Closeup of the side of an Audi car
Industryby Hannah MitchellApril 23, 2026

New-Vehicle Sales Down

A cloudy April forecast was expected due to last April’s sales surge in anticipation of U.S. trade tariff-inflated prices. Meanwhile, automakers pumped up incentives to address today’s consumer wallet woes.

Read More →
Photo of Cadillac Lyriq SUV on road with partly cloudy sky in background
Industryby Hannah MitchellApril 16, 2026

Used Autos Selling for More

A recent price spike due to several larger market forces, though it hasn’t dulled demand, is pushing more consumers to efficient models to squeeze in buys.

Read More →
Ad Loading...
Photo of facade of Waldorf Toyota car dealership
Industryby Hannah MitchellApril 16, 2026

Maryland Auto Group Sells

A group out West picked up the major D.C.-area collection, putting it in the upper tiers of private automotive groups in the U.S.

Read More →
Line graphic showing Cox Automotive's March Credit Availability Index status
Industryby Hannah MitchellApril 13, 2026

Auto Lending Opens Up in March

Lenders loosened access for subprime borrowers, and consumers with negative equity reached a record high, Cox Automotive reported.

Read More →
electric vehicle next to an urban charging station. EV Demand Diverges. F&I and Showroom logo
Industryby Lauren LawrenceApril 10, 2026

EV Interest Varies Regionally

U.S. consumer interest in electric vehicles lags behind other countries despite the rising gas prices caused by the ongoing war in the Middle East.

Read More →
Ad Loading...
Photo of the rear of a Mercedes GLC 400 electric SUV with a skyline in the background
Industryby Hannah MitchellApril 10, 2026

Brands Weighed on Projected Recalls

Research reveals the brands and models most likely to have higher recall rates over their lifetimes. While some brands rank high, addressing safety issues can be a selling point.

Read More →
Photo of white 2026 Ford Bronco on a sandy beach
Industryby Hannah MitchellApril 10, 2026

March New-Vehicle Sales Don’t Reflect War

Cox Automotive data shows Americans doubled down on big-is-better despite price increases. Slightly higher incentives helped fuel the demand.

Read More →
Photo of several cars on lifts in a service center
Industryby Hannah MitchellApril 9, 2026

Franchised Dealers Stand to Gain Service Business

Cox Automotive research shows both the opportunities and the challenges in turning consumers’ growing affordability needs into increased fixed-operations revenue.

Read More →
Ad Loading...
Photo of office desk with open laptop on it and an empty chair next to it
IndustryApril 9, 2026

What Matters Most in Building Your Agency

The partner you choose for growth and expansion is key, because better is the ultimate goal instead of growth for growth’s sake.

Read More →