Significant Dealer Issues

The National Highway Traffic Safety Administration (NHTSA) rules set forth a process allowing automobile dealers and repair businesses to install air bag on-off switches in the vehicles of certain, at-risk individuals. The process first requires that an individual submit an air bag on-off switch authorization request to NHTSA. Once the request has been authorized, NHTSA sends a letter to the individual which is then taken to a dealer or repair business. This letter has a tear-off portion which the dealer or repair business sends to NHTSA once the switch has been installed.  It is still illegal to disconnect an air bag without authorization from NHTSA.

NHTSA sent to all dealers a package of information that includes a brochure for the public entitled, “Airbags and On-Off Switches: Information for an Informed Decision” and copies of the request form which vehicle owners can submit to NHTSA to request approval for installation of the on-off switch. If you no longer have this material, you can obtain the information from the following sources:

  • NHTSA, Media and Marketing Division, HTS-21, 400 Seventh St., S.W., Washington D.C.
  • Fax a letter to NHTSA at 202-366-3443
  • Visit NHTSA`s airbag website
  • Call IADA

A reminder that dealers do not have to honor a request to install an on-off switch.  Any dealer choosing to install the switch must complete a section of the customer`s approval letter and send it back to NHTSA.  The NHTSA website provides a list of dealers who are willing to install on-off switches.


The new NHTSA rules regarding on-off switches do not require dealers to honor a NHTSA letter of authorization to install an on-off switch. The choice on whether to install the switch is up to the individual dealership. Although the potential liability for dealers who install an on/off switch less than the potential liability for dealers who deactivate an air bag, some risk still remains.

In its new rules, NHTSA recognizes that dealers who install an on/off switch might be subject to lawsuits. NHTSA specifically considered drafting a waiver or release of liability that a dealer could ask a customer to sign before installing the on-off switch. The government saw several problems with any waiver it drafted. First of all any waiver signed by the owner of a vehicle would not necessarily prevent lawsuits by friends, family members or subsequent purchasers of the vehicle. Second, NHTSA couldn`t figure out a waiver that would work in all fifty states. Third, a waiver might give a dealer a false impression that a waiver protects them from liability in all cases.

Because of these problems, NHTSA decided not to include a standardized waiver in its final rules. Instead, it threw the problem to the individual dealers and state and national dealers associations.

Unfortunately it is not possible to draft a waiver that provides complete protection from all lawsuits. Realizing many dealers will elect to install the on/off switches for their customers, NADA has recommended dealers develop a model waiver statement and suggest the following language. It is recommended your legal counsel assist you with your waiver of liability statement.

“I acknowledge that, by authorizing the (installation of an airbag on-off switch) (deactivation of an airbag) In my Make, Model, VIN. No., Registration No., I waive any claim or cause of action and agree to hold harmless and/or Indemnify (Name of Dealership) for any and all damages., costs, or liabilities arising out of the (air bag on-off switch Installation) (air bag deactivation).”

NHTSA has also created rules to require manufacturer’s to install advanced airbags in new vehicle models.  Vehicle models equipped with advanced frontal air bags that comply with the new advanced frontal air bag requirements in the amended Federal Motor Vehicle Safety Standard (FMVSS) No. 208 will be phased-in to the marketplace over the next few years. Beginning September 1, 2003, 20% of each manufacturer’s vehicles intended for sale in the U.S. must meet NHTSA’s advanced frontal air bag requirements. The percentage will increase to 65% by September 1, 2004 for 2005 Model Year vehicles and to 100% by September 1, 2005 for 2006 Model Year vehicles. The exception to this is manufacturers who have acquired credits by exceeding the phase-in percentages early. All vehicles produced after September 1, 2006 will have advanced frontal air bags.  More information may be obtained from the NHTSA website.

There appears to be some confusion regarding the disposal of anti-freeze from a dealer’s service department. In checking with the Illinois Environmental Protection Agency (IEPA) they have indicated the disposal of antifreeze is permissible through your local sanitary system, once permission is received in writing from your local sanitary district office.

According to the IEPA, once anti-freeze enters the sanitary system and mixes with domestic sewage, it is no longer considered hazardous. The actual determination of whether used anti-freeze is hazardous is only possible by conducting a laboratory analysis of a specific sample.

To determine whether your local sanitary district accepts or prohibits the disposal of used anti-freeze you should contact your local sanitary district office, or the IEPA Division of Water; Industrial Permit Section at 217/782-1696.

If your sanitary district prohibits the disposal of used anti-freeze into the system, check with your hazardous waste removal company regarding removal of the used anti-freeze.

Effective January 1, 1998, the Automotive Repair Act requires “motor vehicle repair facilities” to disclose pertinent information for repair work estimates and warranties and prohibits certain unlawful practices.** NOTE: the law does not apply to repairs resulting from collisions, which are covered by the Automotive Collision Repair Act. repairs under $100, or certain business fleet repairs.

Before performing repairs that exceed $100, repair facilities must get the consumer’s authorization after giving to the customer either:

a.       a written estimated price for labor and parts for a specific repair and shall not charge for work done or parts supplied in an amount that exceeds the estimate by more than 10% without oral or written consent of the consumer or

b.       a written price limit for each specific repair and shall not exceed that limit without oral or written consent of the consumer.

Any estimate shall also include:

a.       an estimate of the time necessary to complete the repair, if in excess of one working day;

b.       the total costs to repair the vehicle.

c.       all charges to be paid by the consumer to complete the repair, including any charges for estimates and diagnostics.**

d.       a description of the major parts and whether they are new or used.

e.       a calculation of labor costs which may be a combination of industry standard flat rate (time) manuals, actual time, or condition of the vehicle to determine labor costs. This disclosure mandate may also be fulfilled by means of a sign that provides the same information to the consumer. Such a sign shall be posted at a location that can be easily viewed by the consumer.

f.        an indication whether the estimated repairs are required or suggested.

g.       if it is necessary to disassemble, or partially disassemble, a vehicle or vehicle component in order to provide the consumer with a written estimate for required repair or maintenance, the estimate shall show the cost of any disassembly or reassembly, or both.

h.       the date the estimate was prepared or the date the vehicle was presented to the repair facility for repair or servicing, or both, the odometer reading on the vehicle at the time it was left with the repair facility, and a promised date of delivery.

The repair facility must disclose to the customer an estimated price quote or an option to waive the quote by having the customer sign the following statement**:

“You are entitled to a price estimate for the repairs you have authorized. The repair price may be less than the estimate but shall not exceed (1) any price limited estimate or (2) any parts and labor estimate by more than 10%. Additional repairs may not be performed without your consent. You may waive your right to a written estimate and require that you be notified if the price exceeds an amount you have specified.

You may waive your right to an estimate, which gives the repair facility the right to set the price without your permission. Your signature will indicate your selection.

(a) I request an estimate in writing before you begin repairs.

Signature ……………………………

(b) Please proceed with repairs but call me for approval before continuing if the price exceeds $ ……..

Signature ……………………………

(c) I do not want an estimate and you may set the price of repairs.

Signature ……………………………

Date ………. Time ……….

This estimated price for authorized repairs will be honored if the motor vehicle is delivered to the facility within the time period agreed to by the consumer and the repair facility.”

The consumer may waive the estimate if done voluntarily and without coercion. A repair facility or its employees shall not make use of the waiver in an attempt to evade this Act.

After getting the estimate the owner may (i) authorize the repairs at the estimate of cost and time in writing, (ii) request the return of the motor vehicle in a disassembled state, or (iii) request that the vehicle be assembled in reasonably the same condition as when released to the repair facility, in which case the repair facility shall make the motor vehicle available for possession within 3 working days after the time of request, unless parts are not available, making additional time necessary. The repair facility may receive payment for only those items on the schedule of charges to which the facility is entitled.

When the estimate price is insufficient because of unforeseen circumstances, the consumer’s consent must be obtained before the work estimated is done or parts estimated are supplied. If the consumer’s consent is oral, the repair facility shall make a notation on the work order or estimate and on the invoice of the date, time, name of person authorizing the additional repairs, and telephone number called, if any, together with a specification of the additional parts and labor and the total additional cost.

If the consumer is unable to deliver the vehicle when the repair shop is open for repairs or an estimate, the repair shop may not undertake diagnosing or repairing for compensation unless it has:

a.       prepared a written estimate or a firm price quotation of the price for labor and parts necessary to repair the motor vehicle.

b.       By telephone or otherwise, the consumer has been given all of the material information on the written estimate or firm price quotation, and the consumer has approved the written estimate or firm price quotation; and

c.       The consumer has given his or her oral or written authorization to make the repairs pursuant to the written estimate or price quote.

If the consumer’s authorization is oral, the repair facility shall make, on both the written estimate or firm price quotation and the invoice, a notation of the name of the person authorizing the repairs, the date, the time, and the telephone number called, if any. Any charge for parts or labor in excess of the original estimate must be separately authorized.

If the repair facility cannot repair the vehicle in time, it shall notify the owner who may request return of the motor vehicle in either an assembled or disassembled state, in which case the repair facility shall make the motor vehicle available for possession within 3 working days from the date of the request. The repair facility may receive payment for the work actually done and for those items on the schedule of charges to which the facility is entitled.

Invoices must also clearly and accurately disclose certain information about parts and labor (regardless of whether an estimate was required) including the following:

a.       the repair facility’s business name and address,

b.       the date of the invoice,

c.       the odometer reading at the time the invoice was prepared,

d.       the name of the consumer,

e.       the description of the vehicle,

f.        the terms and time limit of any guarantee for the repair work performed.

g.       all repair work done, including all warranty work,

h.       separate identification of (i) each major part supplied in a manner so that the consumer can understand what was purchased and (ii) the total price charged for all parts and labor.

i.         a description of the major parts installed.

Service work and parts shall be listed separately on the invoice, which shall also state separately the subtotal prices for service work and for parts, not including sales tax, and shall state separately the sales tax, if any, applicable to each. The invoice shall itemize any additional charges and include those charges in the total presented to the consumer.

The repair facility shall give a legible copy to the consumer and retain a copy for a period of 2 years from the date of repair, which may be maintained in an electronic format. Records may be stored at a separate location.

If a repair facility provides a warranty on repair parts and labor, the facility shall put the warranty in writing and give a legible copy to the consumer. The consumer’s copy of the warranty must contain the following:

a.       The nature and extent of the warranty, including a description of parts or service included in or excluded from the warranty.

b.       The duration of the warranty and the requirements to be performed by the warrantee before the warrantor will fulfill the warranty.

c.       All conditions and limitations of the warranty and the manner in which the warrantor will fulfill the warranty, such as by repair, replacement, or refund.

d.       Any options of the warrantor or warrantee.

e.       The warrantor’s identity and address.

When repair or diagnostic work is performed pursuant to a warranty, a repair facility shall give an estimate of the time to complete the repairs.

Every repair facility shall post in a prominent place on the business premises one or more signs, readily visible to customers, in the following form:






The first line of each sign shall be in letters not less than 1.5 inches in height, and the remaining lines shall be in letters not less than 0.5 inch in height.

A consumer may remove a vehicle from a repair facility upon reasonable notice and during the repair facility’s business hours, upon paying for the following:

a.       Labor actually performed.

b.       Parts actually installed.

c.       Parts ordered specifically for the consumer’s car if the order is not cancelable or the parts are not returnable for cash or credit.

d.       Storage charges imposed in accordance with the schedule of charges if disclosed to consumers prior to repairs.

** However, transactions involving the retail purchase of merchandise when a facility installs the merchandise as part of the transaction at the discretion of the customer for a firm price are not included. These transactions shall include but not be limited to tires, batteries, oil, and lube jobs.

In 1987, IADA passed a law (815 ILCS 375/6) which permits balloon note financing in Illinois.  Prior to IADA’s action, every retail installment contract had to provide a schedule of periodic installment payments from the due date of the first installment payment to the date of the final maturity of the contract.

With the change in law, Retail installment contracts are permitted to provide for balloon-note financing, meaning “the manner of purchase whereby a consumer agrees to select and perform, at the conclusion of a pre-determined schedule of installment payments made in periodic or monthly amounts, one of the following options:

a.        satisfy the balance of the contractual amount owing;

b.       refinance any balance owing, on the terms previously agreed upon at the time of executing the retail installment contract; or

c.        surrender the vehicle at such time and manner agreed upon at the time of executing the retail installment contract.”

This law also provides that retail installment contracts may provide for deferred payment of a down payment provided any deferred portion of a down payment is payable not later than 10 days prior to the due date of the first regularly scheduled payment and is not subject to a finance charge.  Finally, retail installment contracts may be precomputed or interest bearing.

It is unlawful to operate any motor vehicle with a gross vehicle weight rating of 9,000 pounds or less or any motor vehicle registered as a recreational vehicle under the Illinois Vehicle Code on any highway of this State unless such motor vehicle is equipped with both a rear and front bumper.

Maximum bumper heights of such motor vehicles are to be determined by weight category of gross vehicle weight rating (GVWR) measured from a level surface to the highest point of the bottom of the bumper when the vehicle is unloaded and the tires are inflated to the manufacturer’s recommended pressure. Maximum bumper heights are as follows:


Max. Front Bumper Height

Max. Rear Bumper Height

All motor vehicles of the first division except multipurpose passenger vehicles:

22 inches

22 inches

Multipurpose passenger vehicles and all other motor vehicles:

   4500 lbs. And under GVWR

24 inches

26 inches

   4501 lbs. – 7500 lbs. GVWR

27 inches

29 inches

   7501 lbs. – 9000 lbs. GVWR

28 inches

30 inches

For any vehicle with bumpers or attaching components which have been modified or altered from the original manufacturer`s design in order to conform with the maximum bumper requirements, the bumper height is measured from a level surface to the bottom of the vehicle frame rail at the most forward and rearward points of the frame rail. The bumper on any vehicle so modified or altered shall be at least 4.5 inches in vertical height and extend no less than the width of the respective wheel tracks outermost distance.

However, nothing in the Vehicle Code prevents the installation of bumper guards.

The law does not apply to motor vehicles designed or modified primarily for off highway purposes while such vehicles are in tow or to motorcycles or to motor driven vehicles registered as antique vehicles when the original design of such vehicles did not include bumpers. The provisions of the law do not apply to any motor vehicle driven during the first 1,000 recorded miles of that vehicle, when it is owned or operated by a manufacturer, dealer or transporter displaying a special plate or plates as described in the Vehicle Code while such vehicle is: (1) being delivered by the manufacturing or assembly plant directly to the purchasing dealer or distributor, or from one dealership or distributor to another; (2) being moved from the most direct route from one location to another for the purpose of installing special bodies or equipment; or (3) being driven for purposes of demonstration by a prospective buyer with the dealer or his/her agent present in the cab of the vehicle during the demonstration.

The dealer shall, prior to the receipt of any deposit made or any contract signed by the buyer to secure the purchase of a vehicle, inform such buyer, by written statement signed by the purchaser to indicate acknowledgment of the contents thereof, of the legal requirements of this law regarding front and rear bumpers if such vehicle is not to be equipped with bumpers at the time of delivery.

Any violation of these requirements is a Class C misdemeanor A second conviction is punishable with a fine of not less than $500. An officer making an arrest under this law shall order the vehicle driver to remove the vehicle from the highway. A person convicted shall be ordered to bring his/her vehicle into compliance with this law.

No person who is a resident of California can purchase a new motor vehicle for registration and use in that state unless the vehicle has been certified to meet the Air Pollution Standards set by the California Air Resources Board. The California Department of Motor Vehicles will refuse to title and register any new motor vehicle which has not been California certified.

While Illinois dealers can sell vehicles to California residents, it is the purchaser’s responsibilityfor revising the vehicle to meet Air Pollution Standards in California. Dealers should be cautious and avoid conduct that could be construed as assisting/aiding in a buyer’s evasion of the California requirements.

Any retailer who receives more than $10,000 cash from one buyer as a result of a transaction in trade or business must report it to the IRS on Form 8300.  IRS Publication 1544 explains why, when, and where to report these cash payments. It also discusses the substantial penalties for not reporting them.

The Smoke Free Illinois Act prohibits smoking in all public places in Illinois.  Retail owners must make sure that both their stores and their work-spaces are kept smoke-free. The ban prohibits smoking in every office, store, and every public indoor place (which includes buildings and vehicles that are used by and open to the public) and within 15 feet of any entrance, window, or air vent. Employers are no longer permitted to have a designated smoking area within their premises.

The Illinois Department of Public Health has issued the following guidance:

(1) Smoking is not permitted within any place of employment or public place, including within 15 feet of any entrance, window that opens, or ventilation intake that serves the public place.

(2) Ashtrays or other receptacles must be removed from the premises. The only exception is to have one on hand to extinguish a lit cigarette, cigar, etc. if a person who enters the premises is smoking or begins smoking while inside.

(3) A sign must be clearly and conspicuously posted within all public places. The sign must state “No Smoking” or consist of the international “No Smoking” symbol. The sign must:

(a) Be no smaller than 5 inches by 7 inches;

(b) Contain the telephone number designated by the Department of Public Health for registering complaints (1-888-973-4646);

(c) Contain the Department of Public Health`s website for obtaining a complaint form (; and

(d) Be of sufficient size to be clearly legible to an individual of normal vision from a distance of 5 feet.

(4) The sign must be posted at every entrance to a public place clearly stating that smoking is prohibited. Entrances include those used only by employees or for deliveries.

(5) Employers must communicate to all employees that smoking is prohibited within the premises.

(6) Employers must communicate to all applicants for employment, at the time of application, that smoking is prohibited.

IADA has “No Smoking” signs available on its website at The signs include the Department of Public Health telephone number and website as required by state law.

In clearing a lien on the face of the title, it is necessary that the lienholder or his/her authorized representative stamp the lien “paid” and countersign same with his/her complete signature. Initials in lieu of the complete name cannot be accepted. After a lien is satisfied, the lienholder is required to mail the title to the second lienholder if one exists. Otherwise it is mailed to the owner.

Effective January 1, 1997, Illinois has enacted legislation which provides that ANYONE who is listed as an owner on the certificate of title may sign the contract as a co-buyer, regardless of whether he/she receives physical possession of the vehicle or will use it.

Section 375/18 provides in part that “Each person, other than a seller or holder, who signs a retail installment contract may be held liable only to the extent that he actually receives the motor vehicle described or identified in the contract, except that a parent or spouse or any other person listed as an owner of the motor vehicle on the Certificate of Title issued for the motor vehicle who co-signs such retail installment contract may be held liable to the full extent of the deferred payment price notwithstanding such parent or spouse or any other person listed as an owner has not actually received the motor vehicledescribed or identified in the contract and except to the extent such person other than a seller or holder, signs in the capacity of a guarantor of collection.”

Due to anticipated difficulty in establishing that a person will actually receive possession of the vehicle or use it, anyone who signs a contract as buyer or co-buyer (other than a spouse or a parent) should be listed as an owner on the title. Some captive finance companies may require the completion of other cosigner or guarantor forms to comply with certain federal and state requirements.

A “Consignment Agreement” is an agreement between the owner of a vehicle, known as the consignor, and a licensed vehicle dealer, known as the consignee, wherein the owner delivers physical possession of the vehicle to the dealer for the specific purpose of having the dealer sell the vehicle for the owner and also with the intent that if the vehicle is not sold by the dealer, it is to be returned to the owner.

Pursuant to the Illinois Secretary of State rules (92 Ill. Adm. Code 1020.50), in any transaction whereby a dealer agrees to enter into a consignment agreement involving a vehicle which is required to be titled and licensed in this state, the dealer must secure and have in his possession the following documents:

1) a letter of consignment;

2) the proper ownership document (certificate of title, a salvage certificate, a junking certificate, or a similar document issued by the State of Illinois or another state, which evidences ownership according to the laws of the state of issuance.); if that document is in the possession of a lienholder, then a photostatic copy of that document;

3) a power of attorney authorizing the dealer to assign the ownership document and also to apply for a duplicate ownership document should the original be lost, stolen, or mutilated.

The letter of consignment shall contain the following information:

1) the year, make, model, color and odometer reading of the vehicle;

2) the vehicle identification number;

3) the type, number and state of issuance of the ownership document;

4) The names and addresses of all lienholders;

5) the name and address of the person in possession of the ownership document;

6) the date the vehicle was received by the dealer;

7) the owner`s full name, address, phone number, and driver`s license number. If the owner is a natural person and does not have a driver`s license, then date of birth must be given;

8) the dealer`s name, address and Illinois dealer`s license number;

9) A heading that contains the word “CONSIGNMENT” all in capital letters at least one-eighth (1/8) of an inch in height;

10) the specific terms of the consignment as agreed to by the parties;

11) any other information the parties deem necessary;

12) The signature of the owner and the dealer or his authorized agent affirming that the information contained in the letter of consignment is true and is true and correct and that the ownership documents agree with a physical inspection of the vehicle.

Any transaction to which this rule applies must also be reflected in the records required to be kept by the dealer the Illinois Vehicle Code (section 5-401).

On February 11, 1998 the staff of the Federal Trade Commission (FTC) advised automobile dealers on the limits placed upon obtaining consumer credit reports under the Fair Credit Reporting Act. FCRA Section 604(a)(3)(F).

The FTC staff stated that the FCRA allows a consumer reporting agency (CRA) to provide consumer reports to a party who has “a legitimate business need for the information in connection with a business transaction that is initiated by the consumer”. The FTC staff’s letter included the following specific guidance as to the use of credit reports by automobile dealers:

  • A request to “test drive” a vehicle does not indicate an intent to purchase a vehicle and, therefore, does not “initiate” a business transaction. A dealer must obtain written permission if the dealer wants to check a consumer’s credit report before or during a test drive.
  • The fact that a consumer asks questions about prices and financing does not necessarily indicate an intent to purchase or lease a vehicle from the dealer. The consumer may only be “window shopping” or comparison shopping. Thus, the dealer must obtain the consumer’s written permission before obtaining the credit report if the consumer has simply asked questions about prices and financing.
  • If a dealer needs to see a consumer’s credit report before answering general questions, such as inquiries about available financing when the consumer has not applied for credit, the dealer must obtain written permission from the consumer.

The FTC staff concluded that an auto dealer “may obtain a report only in those circumstances in which the consumer clearly understands that he or she is initiating the purchase or lease of a vehicle and the seller has a legitimate business need for the consumer report to complete the transaction.”

The views set forth in the staff’s letter are the staff’s enforcement views and are not binding on the commission. IADA has an actual copy of the news release or it may be found at or contact the FTC Consumer Response Center at 202-326-3128.

IADA passed legislation amending 625 ILCS 5/5-101(b)(4) which established new requirements for the sale of conversion vehicles by new vehicle dealers . If dealers sell new conversion vehicles (trucks or vans), they must furnish evidence of sales and service agreements from both the chassis manufacturer and the second stage manufacturer. This law became effective in 1991.

Evidence of service and sales agreements from both the chassis manufacturer and thesecond stage manufacturer must accompany the new dealer application if the dealer intends to sell new conversion vehicles as defined below. If the Secretary of State’s office does not receive both evidence of sales and service agreements, a new vehicles dealer’s license cannot be issued. As of January 1, 1991, any vehicle dealers not authorized to sell new conversion vehicles, but possessing Manufacturer’s Certificate of Origin (MCO’s) for conversion vehicles, are required to obtain Illinois titles in their name prior to selling the conversion trucks or vans.

The following new definitions were added to the Illinois Vehicle Code:

Chassis Manufacturer. A person who manufactures and produces the frame upon which is mounted the body of a motor vehicle.

Conversion. A motor vehicle, other than a motor home, which has been modified by a person other than the manufacturer of the chassis of the motor vehicle and which has not been the subject of a retail sale.

Converter. A person who prior to the retail sale of a motor vehicle assembles, installs or affixes a body, cab, or special equipment to a chassis, or who adds, subtracts from, or modifies a previously assembled or manufactured motor vehicle, commonly known as a second stage manufacturer.

IADA helped pass legislation during the 1990 Spring Legislative Session that requires disclosure when non-original equipment (non-OEM) replacement parts are used when repairing vehicles. This legislation only applied to exterior parts (fenders, doors, etc.). The following is the disclosure that must be placed on written estimates:

Disclosure. No insurer shall specify the use of non-OEM after-market crash parts in the repair of an insured’s motor vehicle, nor shall any repair facility or installer use non-OEM after-market crash parts to repair a vehicle unless the customer is advised of the fact in writing. In all instances where an insurer intends to use non-OEM after-market crash parts in the repair of a motor vehicle, the insurer shall provide the customer with the following information:

  1. a written estimate that clearly identifies each non-OEM after-market crash part; and
  2. a disclosure statement incorporated into or attached to the estimate that reads as follows: “This estimate has been prepared based on the use of crash parts supplied by a source other than the manufacturer of your motor vehicle. Warranties applicable to these replacement parts are provided by the manufacturer or distributor of these parts rather than the manufacturer of your vehicle.”

IADA has received a number of calls from members regarding the existence of any limitations on restricting credit card usage. Based on the level of inquiry, IADA members might give consideration to fashioning a policy to be posted in the dealership which is conducive to your business operations. Most dealerships accept credit card payments for deposits on vehicles. Problems might arise however, when a customer wants to pay for his/her vehicle purchase with a credit card. There might not be sufficient margin in the deal to pay the transaction fee and still make a fair profit. If the latter is likely, it is advisable to consider posting a policy stating that credit card payments will be used only in paying for parts and/or service business. Please note, you should check this policy to ensure it is not contrary to any agreements you might have as a merchant with any credit card company. For example, some general rules of MasterCard and VISA are set forth below:

  1. It is violative of the companies’ rules to set a minimum and maximum transaction amount for any transaction or any specific product. “Universal acceptance” is an important requirement.
  2. Merchants cannot offer a discount to induce payment by cash, check, or other method rather than a credit card, unless the discount is available to all prospective buyers, and is clearly disclosed on the dealership premises.
  3. Merchants may not add a surcharge to the price of the product or require the cardholder to pay any part of the transaction processing fee.
  4. Wherever the credit card signage is located, the cards must be accepted. For example, if credit cards are only accepted in parts and service departments, do not display credit card signage in the sales area.

Whatever your dealership’s policy, it should be clear to all sales personnel and customers. It is most advisable to treat all customers equally to avoid problems associated with discriminating between cash paying and credit paying customers. If it is your policy to disallow acceptance of credit cards on vehicle purchases, the policy should be disclosed.

Effective January 1, 1995, IADA passed a law (815 ILCS 710/5) which requires manufacturers and dealers to disclosure damage to new vehicles which exceeds 6% of the manufacturer’s suggested retail price (MSRP). This law does not pertain to used vehicles. The law is summarized as follows:

  1. The manufacturer is obligated to disclose to a dealer, in writing, before delivery of a vehicle to the dealer, all in-transit, post-manufacturer or other damage to the vehicle that was sustained or incurred by the vehicle at any time after the manufacturing process was complete but before delivery of the vehicle to the dealer. The disclosure is not required when the cost to repair does not exceed 6% of the MSRP. Cost of the repair is the dealer’s actual retail repair cost, including labor, parts and materials, if the damage is required. If it has not been repaired, the retail estimate to repair shall be deemed cost. Any motor vehicles that are repaired may be sold as new and shall be fully warranted by the manufacturer.
  2. Whenever a vehicle incurs any in-transit, post-manufacturer or other damage at any time after the manufacturing process is complete, but before delivery of the vehicle to the motor vehicle dealer, the dealer may, within a reasonable period of time after delivery, notify the manufacturer of that damage and either (a) revoke acceptance of delivery of the vehicle, whereby ownership of the vehicle shall revert tot he manufacturer, or (b) request authorization from the manufacturer to the repair the damage incurred by the vehicle. If the manufacturer refuses or fails to authorize repair of the damage within three (3) days of the request by the dealer, the dealer may then revoke acceptance of delivery, and ownership shall revert to the manufacturer.
  3. A dealer must disclose to a purchaser before of a new vehicle, in writing, any damage that the dealer has actual knowledge was incurred by the vehicle at the time after the manufacturing process was complete but before the time of delivery to the purchaser. This disclosure is not required when the cost to repair does not exceed 6% of MSRP. Damage to glass, tires bumpers, video and telephonic components, and in-dash audio equipment is not considered in the calculation of the cost to repair, if replaced with the manufacturer’s original equipment.
  4. If disclosure is not required under this section, a purchaser may not revoke or rescind a sales contract due to the fact that the new vehicle was damaged and repaired before completion of the sale. In that circumstance, non-disclosure does not constitute a misrepresentation or admission of fact.
  5. A manufacturer shall, notwithstanding the terms of any franchise agreement, indemnify and hold harmless the motor vehicle dealer from any and against any liability including reasonable attorney’s fees, that the dealer may be subjected to by the purchaser of the vehicle because of damage that occurred before delivery of the vehicle to the dealer and that was not disclosed in writing to the dealer prior to delivery of the vehicle. This indemnity obligation applies regardless of whether the damage falls below the 6% threshold.

In November 29, 2001 the IRS and Treasury announced the publication of Revenue Procedure 2001-56 which provides guidance on the proper tax treatment of demonstrator automobiles provided to automobile dealership employees.  An IRS Automotive Alert discussing this procedure can be found here.  In addition, NADA has published “A Dealer Guide to the Federal Tax Treatment of Demos.”  Dealers should either call NADA’s Management Education office (800-252-6262 (ext. 2); or 703-821-7227); email NADA at, or log onto the NADA website ( and look for the Management Education information under the Publications section of the member services.  Dealers should read through this information and discuss the matter with their tax professionals to ensure compliance.

Legislation that was signed into law in 1991 caps the maximum amount dealers may be charged by a seller for a Documentary Service (DOC) Fee.

Legislation sponsored by IADA increases the maximum amount of the Documentary Service (DOC) Fee that dealers may charge to buyers from $58.48 to $150 beginning January 1, 2008. Follow-up legislation increased the Doc Fee again, effective January 1, 2020 to $300.

The law states that a seller in a retail installment contract may add a “DOC Fee” for processing documents and performing services related to the closing of a sale. IADA urges you to characterize the DOC Fee as reimbursement for the cost of complying with State and federal law (such as making warranty disclosures or complying with credit reporting rules) rather than for the cost of completing paperwork.

The maximum amount that dealers may charge will begin at $300 (2020) and shall increase annually, equal to the percentage of change in the Bureau of Labor Statistics Consumer Price Index.  The allowable documentary service fee for 2024 is $358.03.

Every retail installment sales contract under the Act shall include a notice containing the following information:


Please note that if your dealership is operating under a Consent Decree related to documentary fees, the Consent Decree may have requirements in addition to those set forth in the above law.

The Illinois Supreme Court has ruled that documentary fees charged by car dealers to prepare various papers on car sales are subject to Retailers Occupation Tax as part of the gross receipts of the sale of the car. Documentary fees are not excludable even as separately stated charges. The ruling does not prohibit the dealer from charging such fees. These fees can be changed within limits set by Illinois law.

The Attorney General’s Office has been cracking down on dealers who refuse to refund down payments when consumers fail to secure financing. The following is the actual law under the Consumer Fraud Act:

“If the furnishing of merchandise, whether under purchase order or a contract of sale, is conditioned on the consumer’s providing credit references or having a credit rating acceptable to the seller and the seller rejects the credit application of that consumer, the seller must return to the consumer any down payment, whether such down payment is in the form of money, goods, chattels or otherwise, made under that purchase order or contract and may not retain any part thereof. The retention by the seller of part or all of the down payment, whether such down payment is in the form of money, goods, chattels or otherwise, under those circumstances as a fee for investigating the credit of the consumer or a liquidated damages to cover depreciation of the merchandise which was the subject of the purchase order or contract or for any other purpose is an unlawful practice within the meaning of the Act, whether that fee or those charges are claimed from the down payment, whether such down payment is in the form of money, goods, chattels or otherwise, or made as a separate charge tot he consumer.”

(815 ILCS 505/2C)(emphasis added).

The above law makes it a violation of the Consumer Fraud Act for a dealership to fail or refuse to return a customer’s down payment when financing for the purchase of a vehicle was unable to be secured by or for the customer. In its correspondence to dealers the AG’s office states:

“Your violation of Section 2C involves your dealerships [sic] refusal to return _______ $1,000.00 down payment when you were unable to secure financing under terms of the original agreement entered between _______________ and _________________. This conduct is a direct violation of Section 2C.”

The AG’s office is also citing dealerships for violations of Section 2C involving the use of a Rider. For example, one such Rider to the retail installment contract stated:

“If the Seller is unable to assign its right, title and interest in this contract to a sales finance agency within thirty (30) days of this date, and so notifies Buyer, Buyer shall, within (2) two days of such notice return the motor vehicle to the Seller’s place of business and Seller shall return to the Buyer all of Buyer’s deposits less Seller’s costs of repair and damage occurring to the motor vehicles while in the Buyer’s possession and this contract shall then be null and void.”

It is the AG’s position that Rider language, such as that set forth above, is a direct attempt to circumvent Section 2C. The dealership cannot retain any portion of a down payment to offset any damage that may be inflicted on a motor vehicle that was delivered prior to credit approval.

Many experts believe 10% of all employees (hourly, salaried, professional) are, or have been, involved in substance abuse on the job. Estimates of the cost to employers (absenteeism, tardiness, accidents, inattention to duties, reduced production, theft, etc.) range from $60 billion to $600 billion annually!

Many employers have work rules prohibiting both the use and possession of drugs and alcohol during work time or on the employer’s premises. Violations are subject to discipline, including discharge. However, two new major attacks on substance abuse and employment have developed:

  1. Testing to screen out applicants and/or to eliminate current employees whose work is affected by substance abuse.
  2. Employee assistance programs (EAPs) to rehabilitate current employees who admit to, or are found to have a substance abuse problem.

Pertinent Laws

Federal Rehabilitation Act of 1973

This law covers all federal contractors and subcontractors with $2,500 or more in a federal contract or subcontract. Permits pre-employment inquiries about handicap on a voluntary basis and preemployment medical examinations. It prohibits discrimination against handicapped applicants, including former substance abusers and those who currently use alcohol and drugs, as long as their use does not interfere with job performance or pose an unreasonable risk to the property or safety of others.

Another provision covers all employers who receive any federal financial assistance, such as loan, grant, or contract (e.g., any employer receiving an SBA loan). Prohibits pre-employment inquiries about past or current handicaps, including substance abuse. You can ask if the person has any disability which would impair his/her ability to perform the job being considered. It also prohibits preemployment medical examinations unless an offer of employment was based upon the passing of a subsequent medical exam.

Illinois Human Rights Act

Covers all employers of 15 or more employees. However, the handicapped discrimination provisions covers employers of one or more employees. The conditions of alcoholism and drug addiction are considered to be handicaps if the individuals can show that the condition results from or constitutes the equivalent of a disease or functional disorder. The Illinois Department of Human Rights has adopted three rules regarding pre-employment examinations (which would include any form of drug or alcohol testing). They must be applied uniformly to all applicants for that particular work; this should be the last step in the employment procedure; and the results must be available to the applicant upon request.


The ISCC’s Labor Regulations Committee suggest the following tips for developing a valid drug/ alcohol abuse screening program:

  1. Decide who will be screened and when.
  • Job Applicants.
  • Current Employees – all employees or only those in sensitive or security related positions, or who operate dangerous equipment.
  • “Reasonable Cause Testing” – Where reasonable cause exists to indicate impairment by drugs or alcohol. Supervisors and other management representatives should be trained in identifying substance abuse by employees.
  1. If employees are represented by a union, comply with any bargaining obligation.
  2. Incorporate recognized safeguards into testing procedure.
  • A pretest questionnaire should be used to screen out individuals taking prescribed or routine over the counter medication.
  • Only use tests which have been proven to be accurate.
  1. Limit disclosure of test results.
  • Keep tests and results strictly confidential.
  • Severely limit who has access to those results.
  • Explain test results to employees.
  1. Discipline, or – what to do with the results.
  1. New hires.
    • Do not hire.
    • Allow to reapply (e.g., some companies permit applicants who fail the drug screen to reapply after six months).
  1. For current employees
    • Discharge.
    • Implement a progressive discipline program, with referral to drug abuse treatment centers, requested prior to the commission of any act subject to disciplinary action.
  1. Provide for a confirmation procedure.
  2. Check out the lab you are using.
    • Review the lab’s qualifications.
    • Have it explain it’s procedures – i.e., how does it maintain a proper chain of custody?
  1. Notify employees of the policy and its safeguards.
  1. The program (including safeguards for employees) should be in writing and explained.
    • Provide copies of the policy to whomever will be subject to it – new employees or all employees.
    • You may want to hold a special group meeting.
  1. If program will effect current employees, should consider staggered implementation.
  2. May want to consider a specified notice requirement for testing of current employees (e.g., Teamsters’ national agreement on substance abuse provides for 30-60 days in writing notice prior to testing unless for “probable cause”).
  1. Use of Consents.
  1. Legend on application for new hires: “I understand that before being hired, I must take a test for the purpose of determining whether I am under the influence of any drug (including alcohol) which might impair my ability to safely perform my job.”
  2. Consent Form
    • Acknowledge receipt of drug testing policy and procedures.
    • Consent to testing, release of results to employer and any review of results by decision
    • makers.
    • Release from liability statement.

Important: Legal counsel is strongly recommended if you are considering putting into effect any form of substance abuse testing. This is an overview, and many aspects of both drug abuse screening and EAPs are omitted in the interest of brevity.

The Illinois Attorney General’s office has stated dealers may charge an environmental service fee provided it is charged separate and apart from service costs and is reasonable. This fee cannot be bundled into the cost of service. Also, the Department of Revenue has indicated that the environmental service fee charged on the repair order would not be taxable. The main purpose of the Truth in Lending Act is to assure the meaningful disclosure of consumer credit and lease terms so consumers may compare credit terms and shop wisely. Certain provisions of the Act apply to advertisements. The requirements of the federal Act, however, are incorporated into the Illinois Advertising Regulations. (See Advertising Regulation Section).Dealers should be careful in the use of the word “free” when giving merchandise, trips, etc. with the purchase of a vehicle. Please see Chapter 4 of the Frequently Asked Questions this website for more information on the Illinois Attorney General Motor Vehicle Advertising Regulations.

Grey market vehicles are foreign-made vehicles not originally manufactured for use in the United States. Once in this country, these vehicles must meet U.S. safety and emission standards for automobiles. The influx of noncomforming cars to the U.S. increased dramatically for several years from 1,500 in 1980 to an estimated 65,000 in 1985. Another spike the number of importation of these vehicles occurred in the early 2000’s.  The numbers have dropped since then but the legal importation and full compliance is often questioned. Some of the concerns of grey-market vehicles pertain to the following:

  • Grey market vehicles represent a safety hazard to the motoring public due to modifications that are frequently incomplete or unsafe.
  • Grey market imports do not have the manufacturer’s warranty protections because of modifications made by grey marketers. Consumers are then responsible for all repairs.
  • Grey market automobiles are not identified as such, and therefore, dealerships do not always know they are buying grey market imports or taking them in trade.
  • Authorized dealers fear liability if they service or repair a grey market vehicle which has been poorly modified. Dealers frequently are unable to get parts for these imports.

For information on how to title a grey market vehicle, please refer to the Illinois Secretary of State Publication, Grey Market Vehicles or call IADA for a copy of the publication.  NHTSA also has a webpage of information regarding vehicle importation.

Recent increased federal IRS and state Department of Employment Services (IDES) scrutiny of businesses that classify employee workers as independent contractors has generated concern over the issue of how the determination is made that an individual is an employee, not an independent contractor.

Many dealers have used independent contract labor instead of bringing on full-time employees in a variety of areas such as security, sales, cleaning of facilities, and cleaning of new and used cars. In most instances, it may be less costly to use outside labor, since the business avoids paying payroll taxes, employee health benefits, vacation, and sick pay. Also, the amount of paperwork necessary for a full-time employee may be reduced.

In reviewing the question of how the IRS determines the status of an individual, it’s helpful to consider the IRS rules which explain some of the key differences between employees and independent contractors. If the IRS can prove that the independent contractor is really an employee of the dealership, the business will be assessed taxes and penalties that could amount to a substantial sum of money.

The following is from an IRS web publication titled: Independent Contractor or Employee.

The tax law covering independent contractors is very complicated. Before you can determine how to treat payments you make for services, you must first know the business relationship that exists between you and the person performing the services. In determining whether the person providing service is an employee or an independent contractor, all information that provides evidence of the degree of control and independence must be considered.

It is critical that you, the employer, correctly determine whether the individuals providing services are employees or independent contractors. Generally, you must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. You do not generally have to withhold or pay any taxes on payments to independent contractors.

Caution: If you incorrectly classify an employee as an independent contractor, you can be held liable for employment taxes for that worker plus a penalty.

Who is An Independent Contractor?

A general rule is that you, the payer, have the right to control or direct only the result of the work done by an independent contractor and not the means and methods of accomplishing the result.


Steve Smith, a window tinter, is laid off from Capital Window & Glass. MegaGlass agrees to pay Steve a flat amount to complete a one-time project tinting windows on a group of cars. MegaGlass provides Steve with no instructions beyond the specification for the finished windows themselves. Steve and MegaGlass have a written contract which provides that Steve, who is considered to be an independent contractor, is required to pay Federal and state taxes, and receives no benefits from MegaGlass. MegaGlass will file a Form 1099-MISC. Steve does the work with new high-end tools which cost him $7000. Steve completes the work from his garage and is not expected or allowed to attend employee meetings at MegaGlass. Steve is an independent contractor.

Who is An Employee?

A general rule is that anyone who performs services for you is your employee if you can control what will be done and how it will be done.

Example 1:

Donna Lee is a salesperson employed on a full-time basis by Bob Blue, an auto dealer. She works 6 days a week and is on duty in Bob’s showroom on certain assigned days and times. She appraises trade-ins, but her appraisals are subject to the sales manager’s approval. Lists of prospective customers belong to the dealer. She has to develop leads and report results to the sales manager. Because of her experience, she requires only minimal assistance in closing and financing sales and in other phases of her work. She is paid a commission and is eligible for prizes and bonuses offered by Bob. Bob also pays the cost of health insurance and group-term life insurance for Donna. Donna is an employee of Bob Blue.

Example 2:

Matt is a shuttler worker for Skye Enterprises. He is required to work an assigned shift totaling 40 hours per week and is required to pick up and deliver cars and trucks to various auction houses throughout his state. Matt is paid a flat rate of 50 cents for every mile driven. Matt is considered an employee of Skye Enterprises.

For additional information on how to determine whether an individual providing services is an independent contractor or an employee, see Publication  15-A, Employer’s Supplemental Tax Guide. (PDF)

If the IRS concludes that your independent contractor is an employee, the cost of taxes assessed and penalties imposed against your business could be quite expensive, particularly if you have several such employees. And if the business cannot afford the taxes or penalties, the business owner can be held personally liable.  Each dealership should review its policies used to determine whether workers are categorized as employees or independent contractors.  Also remember that an independent contractor who is paid in excess of $600.00 in any year must be issued a 1099. The IRS can penalize you for each 1099 not flied by your business.

Effective June 1, 2003,  a “permit­ted user” who has liability insurance cover­age of at least 100/300/50 shall be primary when driving a vehicle issued by a dealer for “loaner purposes”.  If the “permit­ted user” has no Liability insurance or coverage of less than 100/300/50, then the dealer’s liability insurance is primary.  “Loaner purposes” means when a person who, with the permission of the vehicle dealer, drives a vehicle owned or held for sale or lease by the vehicle dealer while the user’s vehicle is being repaired or evaluated.

If a “permitted user” is “test-driving” the dealer vehicle, then the dealer’s insurance is primary in all instances with the permitted user’s insurance secondary.  As always dealers should use appropriate caution in allowing test drives.  “Test driving” occurs when a permitted user who, with the permission of the vehicle dealer or an employee of the vehicle dealer, drives a vehicle owned and held for sale or lease by a vehicle dealer that the person is considering to purchase or lease, in order to evaluate the performance, reliability, or condition of the vehicle.

IADA sponsored this change in the law (HB 4975; Public Act 92-0835) in response to an Illinois Supreme Court ruling which held that the liability policy issued to a car dealer had to cover any person that used a car with a dealer’s permission, even if the car was used as a loaner or a test drive and regardless if the person had their own personal insurance.  As a result of the rul­ing, dealers were faced with either stopping the use of loaners or potential in­creases in insur­ance costs.

Dealers always ask the question: “How may I protect my employees who test drive customer vehicles from getting traffic citations for failure to display evidence of insurance?”

There is no question that the vehicle is insured. Dealers, by law, are required to carry garage liability insurance policies with liability limits that exceed the minimum mandatory insurance law requirements, which cover vehicles driven by their employees. That is why dealer plates, which may be acquired only after filing proof of insurance, comprise valid evidence of insurance.

The only problem is providing employees with some form of evidence of insurance while they are driving customer vehicles. This problem may be resolved with the help of the dealers insurance company. The mandatory insurance law is reasonable and flexible on this point, requiring basically that “the evidence shall be legible and sufficient to demonstrate that the motor vehicle currently is covered by a liability insurance policy.

Possible evidences of insurance include the following:

  • insurance card (Secretary of State rules provide that when insurance cards are issued for fleets, they may state “FLEET” in lieu of vehicle years, makes and VIN’s);
  • photocopy of the current declarations page of the master liability insurance policy;
  • certificate of insurance;
  • dealer identification card identifying the dealer number, file number, tax number, and dealer name.

The customer’s insurance card is valid evidence of insurance. We recommend, however, that employees use the dealer’s insurance card rather than rely on the presence of the customer’s card in the glove compartment.

If, through error or forgetfulness, an employee receives a traffic citation from a police officer, he or she will have to appear in traffic court to prove that the vehicle was insured at the time the citation was issued.

Dealers have no formal responsibility to their customers under the mandatory insurance law. dealer is not responsible for determining if the customer has obtained proper liability insurance. As a public relations gesture, however, the dealer may want to remind customers that the mandatory insurance law requires them to have liability insurance on their vehicles.

Dealers should always provide customers with a document proving purchase of a vehicle. This proof may be used for 60 days along with the Illinois insurance card for the trade in vehicle as evidence of insurance for the newly purchased vehicle. Proof of purchase documents include: 1) bill of sale, 2) purchase agreement, 3) installment contract, 4) copy of front and back of title, 5) Department of Revenue tax form, 6) registration identification card showing transfer information.

Rental vehicles are exempt under the mandatory insurance law. A copy of the rental agreement is evidence of insurance. The mandatory insurance requirements apply if a vehicle is leased for a year or more.

Proof of insurance is not required when purchasing plates or a sticker. Signature of owner (s) and driver license number (s) are required when applying for a title and/or renewal of the license plates.

Mandatory Insurance Card Requirement Exempt for Dealers
IADA members’ inquiries have included questions regarding the exemption for licensed new vehicle dealers in Illinois from the mandate and requirements of the mandatory insurance laws. (625 ILCS 5/7-601, et seq.) The following information represents a reminder of the legal requirements in Illinois as they apply to Illinois licensed new vehicle dealers. In the past, some of our members have advised that certain state and local police officials have stopped dealer-plated vehicles, demanding to view the insurance card.

The foregoing is appropriate for the following reasons. Section 7-601 of the IVC exempts certain vehicles from operation of the mandatory liability insurance provisions, including, without limitation: (6) Other vehicles complying with the laws which require them to be insured in amounts meeting or exceeding the minimum amounts required under this Section…” (625 ILCS 5/7-601(6). If the vehicle(s) fall within aforesaid statutory exemption, the additional requirements of the mandatory insurance provisions (i.e., the insurance card provision of Section 7-602) do not apply. Licensed Illinois new vehicles dealers are statutorily required under Section 5-101 of the IVC to be insured as a condition of licensure in amounts of $100,000 for bodily injury to, or death of, any person, $300,000 for bodily injury, or death of, two (2) or more persons in any one accident, and $50,000 for damage to property. (625 ILCS 5/5-101).

Thus, Illinois licensed new vehicle dealers fall squarely within the exemption of the mandatory insurance provisions and, as such, the insurance card requirement of Section 7-602 does not apply to Illinois licensed new vehicle dealers.

According to information from the Illinois Department of Insurance, dealers who enroll individuals into group insurance (credit life or credit accident and health insurance) are not required to be licensed as insurance producers so long as the enrollers do not receive a commission. When reviewing programs to determine if a license is needed, dealers need to determine whether (1) the customer is enrolled into a group plan and if (2) any of the money received is a commission.

This certificate is a vehicle’s “birth certificate” issued by its maker.

Prior to 1950, there were no such documents required in Illinois, and franchised dealers found themselves competing with unfranchised dealers who cut prices and gave no warranty services.

The Illinois Secretary of State must and does decline to process an application for title for a new vehicle unless it is accompanied by the Manufacturer’s Certificate of Origin assigned by a dealer franchised by that same manufacturer.

It is permissible for one franchised dealer to assign a new vehicle to another dealer franchised by the same manufacturer and this can be done twice. However, an assignment to a dealer who is not franchised by the same manufacturer will not be a basis for an assignment to a buyer – rather the dealer who is not so franchised will be required to secure an Illinois title in his/her name.

The Illinois Secretary of State has published a usefu guide 
on how to obtain a title by mechanic’s or storage lien.   If you cannot obtain the document from their website, please call IADA for more information.  Dealers should note that they also have rights under a common law “artisan’s lien” when they make repairs to the vehicle.  Such a lien can be superior to the lien of a secured party. Dealers may contact IADA for more general information about this common law artisan’s lien.

The Secretary of State`s Vehicle Services Department implemented the Truth-in-Mileage Act (Odometer Certification, 625 ILCS 5/3-112.1) as of January 1, 1990. The Act requires the Secretary of State`s office to:

  • Issue a title which contains the federal odometer disclosure language;
  • Print the certified odometer reading on the face of the title; and
  • Print the certified odometer notation on the face of the title.

To fulfill the last two responsibilities, the new title application must include the certified odometer reading and whether the odometer reading is actual, not actual, or in excess of mechanical limits. The following guidelines are to be used when certifying the odometer reading.

ACTUAL – If the odometer reading is being certified as “Actual Mileage”, the new reading must be higher than what is on the face of the title, and “Actual Mileage” or no notation must be in the legend area.

IN EXCESS OF MECHANICAL LIMITS – If the odometer reading is being certified as “In Excess of Mechanical Limits”, the previous odometer reading on the face of the title must have been certified as “Actual Mileage”, “Mileage Exceeds Mechanical Limits”, or no notation.

NOT ACTUAL – If the odometer reading is being certified as “Not Actual Mileage”, the previous odometer reading on the face of the title must have been certified as “Actual Mileage”, “Not Actual Mileage”, “Mileage Exceeds Mechanical Limits”, or no notation.

Whenever an odometer reading is certified as “Not Actual Mileage” it will remain “Not Actual Mileage” regardless of future certifications.

As of January 1, 1990, the term “unknown” will no longer be used when issuing an Illinois title. If the odometer reading, indicated on the face of the title, is unknown, the seller will be responsible for certifying the reading as actual, not actual, or in excess of mechanical limits. The certified odometer reading will be printed on the face of the new title along with the appropriate odometer notation.

The new odometer law does not include all vehicles. The federal and state laws exempt the following vehicles from the odometer disclosure statement requirements:

  • For 2010 model year and older, more than 9 years old (current year – 9 = lst exempt model year)
  • Non-motorized 
  • For 2010 model year and newer, 20 or more years old
  • More than 16,000 lbs. (gross vehicle weight rating)
  • Transferred among franchised dealers
  • Purchased by federal government

When a title is issued for any of the above-mentioned vehicles, the odometer notation “Mileage Not Required” will be printed in the legend area on the face of the title. Any subsequent Illinois titles issued for the vehicle will show the notation “Mileage Not Required”. Therefore, odometer readings will not be printed on the face of the title for antique and classic vehicles, even though odometer disclosures may have been completed.

Link to Illinois Secretary of State’s Odometer Disclosure Statement. 


Pursuant to Illinois Law (625 ILCS 5/5-401.2; 625 ILCS 5/5-402.1; 625 ILCS 5/5-403; and 625 ILCS 5/5-403.1) and Secretary of State rules (92 Ill.Admin.Code 1020.20) Every licensed dealer is required to maintain records of new and used vehicle purchases and sales as well as a record of used parts and accessories bought and sold.

Dealers who have such records readily available for inspection on an in-house computer system need not duplicate such records in a so-called “police book”. Dealers who are not set up on computer, or otherwise may not have such records readily available to a Secretary of State investigator, are required to maintain such records in a bound ledger, police book.

The Association office has ledger books available for IADA members.  To order call IADA at 800-252-8944 or 217-753-0220.


Description of Items Retention Period
Bank Records  
Bank Drafts and Paid Notices 10 years
Bank Statements and Reconciliations 10 years
Cancelled Checks 10 years
Duplicate Deposit Tickets 10 years
Employee Records  
Demonstrator Agreements 6 years
Employee Evaluation and Conduct Files 1 year
Employee Applications 1 year
Employment Contracts Indefinitely
Payroll Records 6 years
Salespersons Compensation Records 3 years
Terminated Employee File-General 3 years
Termination of Employment and Benefits Notice Indefinitely
Time Tickets 3 years
Withholding from Wages Authorizations 4 years
Accounts Payable Record 3 years
Accounts Payable Voucher 3 years
Accounts Receivable Record Indefinitely
Cash Receipt 2 years
Claims Register 3 years
Compensation Records 6 years
Credit Memos 6 years
Daily Parts and Accessories Counter Sales Summary 3 years
Daily Service Sales Summary 3 years
Fixed Asset Inventory and Depreciation Record 6 years
Journal Voucher 3 years
Monthly Analysis Sheet 3 years
Notes Receivable Record 3 years
Peg Strip Cash Receipt 2 years
Petty Cash Summary 3 years
Petty Cash Vouchers 3 years
Prepaid and Accrued Schedules 3 years
Purchase Orders 2 years
Retirement and Pension Records Indefinitely
Disability and Sick Benefit Records 6 years
Cash Disbursements 6 years
Cash Receipts 6 years
Disbursements and Purchase 6 years
General 6 years
Internal Sales 6 years
New Vehicle Sales 6 years
Parts and Accessories Counter Sales 6 years
Payroll 6 years
Purchase 6 years
Service Sales 6 years
Standard Entries 3 years
Lease Agreements Indefinitely
Mortgages, Notes and Leases (expired) 10 years
Expense Indefinitely
General Indefinitely
Sales and Cost of Sales Indefinitely
Motor Vehicle-Sales/Inventory/Other Records  
Car Deal Envelope 3 years
Dealer Vehicle Reassignment Forms 4 years
Motor Vehicle Consignment Agreements 4 years
Motor Vehicle Purchase Contracts 4 years
New Vehicle Inventory 3 years
Used Vehicle Appraisal Reports 1 year
Used Vehicle Disclosure Statements 4 years
Used Vehicle Inventory 3 years
Used Vehicle Log Book 5 years
Vehicle Invoices (Factory and Other) 4 years
Inventory Schedules for New and Used Vehicles 6 years
Parts Department Records  
Parts and Accessories Sales Invoice 3 years
Parts Back Order Forms Until filled
Receiving Report 1 year
Stock Requisition 1 year
Service Department Records  
Customer Repair Orders  
Office Copy 7 years
Hard COPY 7 years
Daily Time and Job Ticket 3 years
Internal Repair Orders  
Office Copy 7 years
Hard Copy 7 years
New Car Get Ready 6 months
Sublet Repair Invoices 10 years
Policies Indefinitely
Accident Reports 10 years
Insurance Claims (after settlement) 10 years
Safety Reports 10 years
Group Disability Records 10 years
Fire Inspection Reports 6 years
Claims (after settlement) 10 years
Traffic (Receiving and Shipping)  
Export Declarations 4 years
Freight Bills 4 years
Manifest 4 years
Shipping and Receiving Reports 4 years
Waybills and Bills of Lading 4 years
Other Records—General  
All Customer Files 10 years
All Correspondence Files 6 years
Audit Reports Indefinitely
Depreciation Schedules Indefinitely
Capital Stock Books Indefinitely
Construction Contracts Indefinitely
Corporate Minute Book of Directors, Stockholders, By-Laws, & Charter Indefinitely
Credit Application and All Related Records 5 years
Financial Statements Indefinitely
Government Contracts Indefinitely
Installment Contracts-Customer 1 yr. after last payment
Papers Pertaining to Litigation Indefinitely
Promissory Notes Until satisfied
Vendors Invoices 10 years
Warranty and Service Contract Copies 6 years
Patents, Copyright and Trademark Registrations Indefinitely
Proxies 10 years
Business License Filings 6 years
Deeds and Easements Indefinitely
Partnership Agreements Indefinitely


Illinois State law (415 ILCS 5/22.23) requires all used lead-acid batteries to be recycled.  Any retailer of lead-acid batteries shall:

(1) accept for recycling used lead-acid batteries from customers, at the point of transfer, in a quantity equal to the number of new batteries purchased; and

(2) post in a conspicuous place a written notice at least 8.5 by 11 inches in size that includes the universal recycling symbol and the following statements: “DO NOT put motor vehicle batteries in the trash.”; “Recycle your used batteries.”; and “State law requires us to accept motor vehicle batteries for recycling, in exchange for new batteries purchased.”.

Any retailer may either charge a recycling fee on each new lead-acid battery sold for which the customer does not return a used battery to the retailer, or provide a recycling credit to each customer who returns a used battery for recycling at the time of purchasing a new one.

No lead-acid battery retailer may dispose of a used lead-acid battery except by delivering it (1) to a battery wholesaler or its agent, (2) to a battery manufacturer, (3) to a collection or recycling facility, or (4) to a secondary lead smelter permitted by either a state or federal environmental agency.

Any wholesaler of lead-acid batteries shall accept for recycling used lead-acid batteries from customers, at the point of transfer, in a quantity equal to the number of new batteries purchased.

A retailer or wholesaler who accepts used lead-acid batteries for recycling pursuant to this law shall not allow such batteries to accumulate for periods of more than 90 days.

Finally, the law provides that no person may knowingly cause or allow: (1) the placing of a lead-acid battery into any container intended for collection and disposal at a municipal waste sanitary landfill; or (2) the disposal of any lead-acid battery in any municipal waste sanitary landfill or incinerator.

It is unlawful for a dealer or a customer to alter or remove emission control equipment. There is nothing in the federal law that prevents a dealership from selling a motor vehicle that has had emission control equipment altered or removed before the dealership acquired the vehicle. But itis illegal for a dealer to alter or remove emission control equipment, and the civil penalty can be severe – up to $25,000 per motor vehicle or motor vehicle engine.

A dealer should get a signed statement from the customer when acquiring a vehicle with tampered emission control equipment. This disclosure statement should state that the emission control equipment had been altered or removed before he/she received the vehicle, which protects the dealership from civil penalties. When the vehicle is then resold, this information should also be noted on the customer`s order to protect your dealership from a claim of misrepresentation.

Effective July 28, 1997, the Illinois Renter’s Financial Responsibility and Protection Act  (625 ILCS 27/1 et. seq.)  restores responsibility to the renter in the rental transaction.  Prior to this change, a person renting an automobile was only responsible for a maximum of $200.00 of damage to a vehicle, even if the damage was the renter’s fault. That statute also prohibited rental agencies from offering collision damage waiver (CDW) protection as an option for Illinois renters.

Requirements under the Act

Scope of Renter’s Liability For Damages

The following summary outlines the scope of the renter’s liability for damages to the rental car under the new act.

  1. Limits
  1. Through 5/31/98 the maximum amount that may be recovered from an authorized driver shall not exceed $6000.
  2. 6/1/98 through 5/31/99 – the maximum recovery shall not exceed $7500.
  3. 6/1/99 through 5/31/00 – maximum recovery shall not exceed $9000.
  4. 6/1/2000 and annually thereafter, maximum recovery amount increases $500 per year. The following chart sets forth the increases over the next few years:
Effective Date of Increases Maximum of Renter’s Liability for Damages
June 1, 2002 $10,500
June 1, 2003 $11,000
June 1, 2004 $11,500
June 1, 2005 $12,000
June 1, 2006 $12,500
June 1, 2007 $13,000
June 1, 2008 $13,500
June 1, 2009 $14,000
June 1, 2010 $14,500
June 1, 2011 $15,000
June 1, 2012 $15,500
June 1, 2013 $16,000
June 1, 2014 $16,500
June 1, 2015 $17,000
June 1, 2016 $17,500
June 1, 2017 $18,000
June 1, 2018 $18,500
June 1, 2019 $19,000
June 1, 2020 $19,500
June 1, 2021 $20,000


Requirement of Damage Waivers

The following summarizes the requirements relative to the offer and sale of damage waivers by the rental company.

  1. A rental company may not sell a damage waiver unless the renter agrees to the damage waiver in writing at or prior to the time the rental agreement is executed.
  2. A rental company may not void a damage waiver except for one or more of the following reasons which must be stated in writing:
    1. Damage or loss while the rental vehicle is used to carry persons or property for a charge or fee.
    2. Damage or loss during an organized or agreed upon racing or speed contest or demonstration or pushing or pulling activity in which the rental vehicle is actively involved.
    3. Damage or loss that could reasonably be expected from an intentional or criminal act by the driver other than a traffic infraction.
    4. Damage or loss to any rental vehicle resulting from any auto business operation, including but not limited to repairing, servicing, testing, washing, parking, storing, or selling of automobiles.
    5. Damage or loss occurring to a rental vehicle if the rental contract is based on fraudulent or material misrepresentation by the renter.
    6. Damage or loss arising out of the use of the rental vehicle outside the continental United States when such use is specifically prohibited in the rental agreement.
    7. Damage or loss occurring while the rental vehicle is operated by a driver not permitted under the rental agreement.

c.   Maximum Allowable Collision Damage Waiver Charges:

$12.50 per day

State and federal law strictly limit what motor vehicles a dealer can sell to schools.  Unless selling a motor vehicle certified as a school bus, a dealer should use the following guideline which combines the state and federal laws before selling any vehicle to a school.




·         Do not sell/rent/lease any new vehicle designed to carry 11 or more students.

·         Can sell/rent/lease any used vehicle designed to carry 7-16 passengers but only if it is only used to transport 15 or less students to or from interscholastic athletic or other interscholastic or school sponsored activity for primary or secondary schools.

·         Can sell/rent/lease any new or used motor vehicle of the first division (designed to carry no more than 10 persons).


A key provision of these rules is the phrase “a vehicle designed to carry . . ..”  Be sure to determine the number of passengers which the vehicle is designed to carry before selling it.  For example, even if a new van designed for 15 passengers was missing two bench seats, a dealer cannot sell that van to a school.


Finally, “school” means any institution whose central purpose is the education of preprimary, primary, or secondary school students whether public or private and including nursery schools (children 2-6 years of age).  This does not include little league teams, boy or girl scouts, or other organizations outside the school’s jurisdiction.

US Dept. of Transportation – NHTSA LETTER




QUESTION:                                What is a school bus?


The National Highway Traffic Safety Administration (NHTSA), U.S. Department of Transportation, defines a bus as a motor vehicle designed to carry 11 or more persons (including the driver), and a school bus as a bus that is sold or introduced into interstate commerce “for purposes that include carrying students to and from school or related events.” This definition does not include buses operated as common carriers in urban transportation.


QUESTION:                                What is a school related event?


A school related event is any activity sponsored by a school, whether on or off the school grounds, including transportation between home and school, sports events, band concerts, field trips, and competitions such as debate or chess tournaments.


QUESTION: To whom do the Federal Motor Vehicle Safety Standards (FMVSSs) apply?


The FMVSSs apply to motor vehicle manufacturers and any person selling or offering for sale or lease a new motor vehicle. It is a violation of Federal law for any person knowingly to sell or-lease a new vehicle for use as a school bus that does not comply with all FMVSSs applicable to school buses. The law provides substantial penalties for violation of the FMVSSs.


QUESTION: Do the school bus requirements apply to sales of buses to private schools?

Yes. NHTSA looks to the nature of the particular institution purchasing the bus. If the central purpose of the institution is the education of preprimary, primary, or secondary school students, whether public or private, new buses sold to the school must comply with the FMVSSs applicable to school buses.

QUESTION: What are my responsibilities when selling a new bus to a school or school bus contract operator?

dealer may not sell any new bus to a school or a school bus contract operator to transport students unless it has been certified by its manufacturer as complying with all school bus standards.

QUESTION:  Does Federal law require school buses to be yellow?

No.  Federal law applies only to safety performance standards, and not to design standards or appearance. However, NHTSA provides recommendations for the States on various operational aspects of school bus and pupil transportation safety programs, in the form of Highway Safety Program Guideline No. 17, Pupil Transportation Safety. Among other matters, Guideline 17 recommends that school buses be yellow.


QUESTION: Can the States change Federal requirements?

No.  A State may not prescribe a standard for new vehicles covering the same aspect of performance as a Federal standard unless the State standard is identical to the Federal standard.  However, a State may impose more stringent standards than Federal standards for vehicles obtained for the use of the State or one of its political subdivisions.

NHTSA Links:  For your information, the following are a few links to related to selling of school busses on NHTSA website.  USE OF NONCONFORMING VEHICLES FOR SCHOOL TRANSPORTATIONInterpretation letter regarding use of vans by day-care facilities.

Illinois law provides that a renter/lesser of a vehicle is not liable for parking tickets if they provide to the requesting authority the name and address of the lessee in a timely manner.

Section 5/11-1306 of the Illinois Vehicle Code states:

No person who is the lessor of a vehicle pursuant to a written lease agreement shall be liable for the violation of any parking or standing regulation of this Act, or of a local authority, involving such vehicle during the period of the lease; provided that upon the request of the appropriate authority received within 120 days after the violation occurred, the lessor provides within 60 days after such receipt the name and address of the lessee.  The drivers license number of a lessee may be subsequently individually requested by the appropriate authority if needed for enforcement of the Act.  (625 ILCS 5/11-1306).

The Illinois Vehicle Code also provides that:

Every person in whose name a vehicle is registered pursuant  to  law  and  who leases  such  vehicle  to  others,  after  receiving written notice of a violation of this Article or a parking regulation of a  local  authority involving  such vehicle, shall upon request provide such police officers as have authority of the offense,  and  the  court  having  jurisdiction thereof,  with a written statement of the name and address of the lessee at the time  of  such  offense  and  the  identifying  number  upon  the registration  plates  and  registration  sticker  or  stickers  of  such vehicle.  (625 ILCS 5/11-1305).

IADA amended the repairer licensing statute (625 ILCS 5/5-301) to provide that new vehicle dealers are no longer required to apply for a repairers’ license.  This does not relieve a new vehicle dealer of any responsibilities (posting requirements, record maintenance, etc.) as a repairer as stated in the Vehicle Code. Used vehicle dealers must still obtain a repairers’ license if they are engaged in that activity.

The EPA has taken the position that it is a violation to install after-market catalytic converters, under warranty, in most vehicles less than five years old and under 50,000 miles. You can use original equipment converters under any situation or an EPA-approved after-market converter in the following three specific cases:

  1. If a vehicle is missing a converter.
  2. If a state or local inspection program determines the original converter is lead poisoned or damaged and needs replacement.
  3. If the car is more than five years old, has more than 50,000 miles on it, and its converter has a defect which requires replacement.

Other items EPA will check include: that the ID number of the converter matches the sticker under the hood; the EPA mileage portion of the Monroney label is on all new cars; the dealership keeps old catalytic converters for at least fifteen days; and any replacement engine is the same model year as the vehicle or newer.

Dealers should use only OEM replacement catalytic converters on vehicles under five years old and with less than 50,000 miles.

The Secretary of State has published a Fact Sheet titled “Obtaining Title for Repossessed Vehicle” which provides guidance on how to follow the repossession provisions of Illinois law.  If you cannot obtain a copy  of the publication from the Secretary of State’s website, please call IADA for the information.

Effective July 1, 2003, Senate Bill 841 greatly narrows the Rolling Stock.   Illinois Department of Revenue Bulletin 2004-07 provides a summary of the changes and the details on the new rolling stock test.  The RUT-7 form has also been updated.  In addition, you may also access the emergency rules (500 pages in PDF Adobe format) implementing the new rolling stock test which are effective July 7, 2003.  Basically, the new law provides a truck is eligible for the rolling stock exemption if 51% of the trips are interstate.

Illinois law provides that persons of the age 18 years old shall be considered of legal age for all  purposes including the purchase of a vehicle. Until a person reaches the age of 18, the law considers that person a minor. While it is perfectly legal for a minor to purchase a vehicle in the same manner as an adult, a major difference exists in the minor’s power to return the vehicle and release himself from the contract. Contracts by minors are voidable. That is, a minor may rescind the vehicle contract of sale and recover the purchase price paid, even though the vehicle has been used and deteriorated in value. Dealers concerned about rescission, potential loss or other trouble, are advised to exercise extreme caution in considering a vehicle sale to a minor. Rather, the sale should be made to an adult; the bill of sale made out to an adult; and the certificate of title applied for in the name of an adult.|

The 83rd General Assembly created a law (735 ILCS 5/2-416) that would have allowed corporations, partnerships, and sole proprietorships the authority to appear before the court in disputes involving less than $2500 without having to retain an attorney.

However, the Illinois Supreme Court rebuked this legislation and incorporated their own administrative Rules (Supreme Court Rule 282) on representation of corporations in small claims court. In essence, the Supreme Court Rule states that no corporation may appear as claimant, assignee, subrogee or counter claimant in a small claims proceeding, unless represented by counsel. When the amount claimed does not exceed $1500, a corporation may defend as adefendant in any small claims proceeding in any court of this state through any officer, director, manager, department manager or supervisor of the corporation without counsel.

Illinois law (625 ILCS 5/5-104.1) requires that informational labels be placed on pick-up trucks and recreational vehicles before they could be sold in Illinois. Every manufacturer of second division vehicles having a gross vehicle weight of 8,500 pounds or less shall securely affix to the windshield or side window the price sticker of the vehicles.  This law does not apply to second division vehicles for which the annual sales in Illinois of the previous model year were less than 200.

Under Illinois law (625 ILCS 5/5-106) no licensed dealer may keep open, operate, or assist in keeping open any established place of business for the purposes of buying, selling, bartering, or exchanging, whether new or used, vehicles on Sunday. The Sunday Closing Law does not apply for the follow purpose:

  1. to sell petroleum products, tires or repair parts and accessories; to operate and conduct a motor vehicle repair shop; to supply services for the washing, towing or wrecking of motor vehicles; to participate in a new vehicle show or display when participated by two or more licensed dealers who have been granted a supplemental license by the Secretary of State;
  2. to sell motorcycles
  3. to offer for sale manufactured housing;
  4. to sell motor homes, mini motor homes, van campers and recreational trailers when offered by a dealer at a place of business where only such vehicles are displayed for sale.

Violators have been cited under the Illinois Vehicle Code, with license suspension being the ultimate penalty.

A temporary registration permit plate (TRP) to operate a newly acquired vehicle for which a valid registration application has been filed, accompanied with proper fees, can be issued by licensed vehicle dealers.  Orange window stickers are no longer issued.

The TRP expires 90 days after the date of issue of the permit, unless extended or reduced at the discretion of the Secretary of State.

Issuing Temporary Registration Permit Plates

The TRPs shall be issued in numerical sequence as received from the Secretary of State.

Each dealer may issue Temporary Permits only to persons purchasing vehicles from that dealer and only after application for title and registration has been completed.  When preparing an Application for Vehicle Title and Registration, the number of the TRP issued should be indicated.  Contemporaneous with the issuance of a TRP, the dealer shall access the Secretary of State’s Internet site for the registration of the TRP and enter all requested data.

Temporary Permit plate receipt forms shall contain all of the information requested, where applicable. The original of the plate receipt form shall be given to the applicant and the copy shall be maintained by the dealer.  Temporary Permit plate receipt forms shall bear the name of the issuing entity and the signature of the issuing employee.  Dealers shall maintain copies of receipt forms for all Temporary Permit plates issued for a period of 3 years.

Prior to delivering a TRP to the applicant or attaching a one to a vehicle, the dealer shall lift the clear overlay covering the expiration date area, blacken in with a permanent black marker the month and year during which the TRP will expire, making certain to blacken in the entire box including the portion of the silver hologram strip running through the box designating the month, and remove the white backing from the overlay and apply the overlay securely over the expiration date area.

The applicant must display a TRP in place of the license plate on the back of the vehicle until receiving Illinois license plates.  The TRP must be removed upon receipt of the registration plates and/or sticker and is not transferable from one person to another, nor from vehicle to vehicle.

Receipt and Storage of Temporary Registration Permit Plates

Within two business days after receipt of Temporary Permit plates from the Secretary of State the dealer shall access the Secretary of State’s Internet site for the registration of Temporary Permit plates and acknowledge receipt of the plates. The dealer shall store the Temporary Permit plates in a secure location to prevent theft, loss or misuse of the plates.  Dealers shall reimburse the Secretary of State $ 50 per Temporary Permit for lost, missing, stolen, or destroyed Temporary Permits. The Secretary of State shall have the discretion to waive this fee upon satisfactory proof that the Temporary Permits were destroyed by fire or flood, or stolen in connection to a theft of the premises.  Additional TRPs registered to the issuing agency may be obtained by contacting: Sticker and Supply Section, Secretary of State, 3701 Winchester Rd., Springfield, IL 62707 (217) 782-2886.

The Secretary of State shall have free access to the offices and places of business to examine fully all Temporary Permit books and other business records, documents, and files of the issuer to determine whether such issuer is complying with the provisions of this Section.

The Secretary shall, upon determination by any court proceeding or at an administrative hearing, decline to issue such Permits to any dealer or demand return of unused Permits for violating any provision of the Illinois Vehicle Code, or any administrative rule adopted pursuant to the Vehicle Code, for the failure to keep records or make computer entries as required by this Section, or for any other violation relating to the use or issuance of Temporary Permits. Secretary of State personnel may initiate an action against a dealer by filing a complaint with the Secretary of State’s Administrative Hearings Department. Thereafter, a notice of hearing shall be issued to the dealer specifying the alleged violations. The dealer shall be entitled to an administrative hearing pursuant to Section 2-118 of the Illinois Vehicle Code [625 ILCS 5/-2-118] and regulations promulgated thereunder. All dealers receiving such Temporary Permits shall maintain records reflecting the information required for completion of the receipt form for a Temporary Permit plate. Failure to do so could result in the denial, revocation, or suspension of a dealer’s license under Section 5-501 of the Illinois Vehicle Code.  The issuer is responsible for acts or omissions of issuer’s employees while engaged in the distribution of Temporary Permits.

The so called “three day cooling off” law (815 ILCS 505/2B) provides that sales made at the buyer`s residence can be cancelled within three business days of the transaction.  The law does not apply to sales at the dealership premises.  The following statutory language typically exempts dealers from these provisions:

“This Section does not apply to any transaction made pursuant to prior negotiations in the course of a visit by the consumer to a retail business establishment having a fixed permanent location where the goods are exhibited, or the Services are offered, for sale or lease on a continuing basis;” (815 ILCS 505/2B)

The Illinois Vehicle Code (625 ILCS 5/12-503) prohibits any person from driving a motor vehicle with any “window application, reflective material, nonreflective material or tinted film upon the front windshield, sidewings or side windows immediately adjacent to each side of the driver.”  The law does permit “a nonreflective tinted film . . . along the uppermost portion of the windshield if such material does not extend more than 6 inches down from the top of the windshield.”

Nothing in section 12-503 creates a cause of action on behalf of a buyer against a dealer or manufacturer who sells a motor vehicle with a window which is in violation of the Section.  Furthermore, nothing contained in section 12-503 prohibits “the use of nonreflective, smoked or tinted glass, nonreflective film, perforated window screen or other decorative window application on windows to the rear of the driver`s seat, except that any motor vehicle with a window to the rear of the driver`s seat treated in this manner shall be equipped with a side mirror on each side of the motor vehicle which are in conformance with” the Illinois Vehicle Code.

Nonetheless, dealerships should remove any window tinting on the vehicles retailed. The law permits you to sell the vehicle with tinted windows, but does not allow the customer to drive the vehicle with tinted windows.

Any person who sells or delivers tires at retail in Illinois must collect the Tire User Fee.  However, IADA passed legislation which creates an exemption for dealers from the used tire provisions of the Illinois Environmental Protection.

The fee is imposed on

  • new and used tires for vehicles in which persons or property may be transported or drawn upon a highway, as defined in the Illinois Vehicle Code, Section 1-217;
  • aircraft;
  • special mobile equipment (such as street sweepers, road construction and maintenance machinery); and
  • implements of husbandry (farm wagons and combines).

The following exemptions are allowed:

  • Tires that are placed on a vehicle that is not transported or drawn upon a highway (e.g.,race cars, fork lifts, all-terrain vehicles, and lawn and garden tractors)
  • Tires sold with a vehicle
  • Tires sold through the mail
  • Reprocessed tires

A “reprocessed tire” is a used tire that has been recapped, retreaded, or regrooved and that has not been placed on a vehicle wheel rim. Used tires sold at retail that have not been “reprocessed” are not exempt.

The rate is $2.50 per tire sold or delivered at retail. Form ST-8, Tire User Fee, is due quarterly, on or before the last day of the month following the quarter for which the return is filed. The fee must be collected from the purchaser by adding it to the selling price of the tire. Additionally, the fee must be stated as a separate item, apart from the selling price of the tire. The fee is not considered part of the gross receipts, and thus sales tax should not be charged on the fee.

The IADA passed exemption provides that instead of filing returns (and registering as tire retailers) dealers can remit the tire user fee to their suppliers of tires, provided the supplier is a registered retailer of tires and arranges to collect and remit the fee. The tire supplier who supplies tires to dealers is liable for the tax on all tires sold to the dealer and must provide the dealer with a receipt that separately reflects the tire tax collected from the dealer on each transaction. The tire supplier must also accept used tires for recycling from the dealer’s customers.

Dealers who have an arrangement with their tire suppliers should maintain in their books evidence, such as receipts, that the user fee was paid to the tire supplier and that the supplier agreed to remit the fee to the Department of Revenue for each tire sold. Otherwise, the dealer will be directly liable for the fee for all tires sold at retail. Dealers paying the fee to their suppliers are not entitled to the per tire collection allowance.  Statutory Reference 415 ILCS 5/55.8-10

Pursuant to an Environmental Protection Agency (EPA) rule effective January 29,1998, automotive service technicians are required to recycle HFC-134a and other non-ozone-depleting refrigerants used in the servicing of motor vehicle air conditioners(MVACs). The new rule also requires that any equipment used to recover or recycle HFC-134afrom MVACs meet EPA standards and be tested by an approved testing laboratory. Equipment that recovers, but does not recycle, specific refrigerant blends also must meet EPA standards and be tested.

After January 29, automotive service technicians must be certified to handle non-ozone-depleting refrigerants. Technician training and certification programs must be revised to reflect the use of recover/recycle and recover-only equipment designed to service non-CFC-12 MVAC systems. However, the new rule will grandfather technicians currently certified under section 609 for CFC-12 MVAC systems.

Since the rule does not restrict the sale of HFC-134a or any other non-ozone-depleting refrigerants, anyone may purchase these refrigerants in any size container (unless state or local regulations dictate otherwise). In addition, the rule spells out in detail how refrigerants recovered from automobile recycling or disposal facilities (i.e., scrap yards) may be handled.

Additional information concerning MVAC refrigerant recycling is set out in NADA’s A Dealer Guide to the EPA Mobile Air Conditioning Coolant Recycling Regulation, L.30.Questions concerning the new rule may be directed to NADA Regulatory Affairs, (703)821-7040.

Which Vehicles Must Be Inspected and By When – All commercial motor vehicles operated in interstate commerce must be inspected once a year as of July 1, 1990. Commercial motor vehicles are defined as any self-propelled or towed vehicle used on highways in interstate commerce to transport passengers or property:

  • if such vehicle has a gross vehicle weight rating of 10,001 or more pounds;
  • if such vehicle is designed to transport more than fifteen passengers, including the driver; or
  • if such vehicle is used in the transportation of hazardous materials.

This definition clearly includes vehicles owned by dealerships and operated in interstate commerce, including large wreckers or parts trucks. New vehicles must be inspected as soon as they are placed in service. ATD suggests that dealerships also inspect used commercial vehicles that they sell or lease, as a customer service.

Dealers should note that the regulations require that:

  • drivers perform a pre-trip and post-trip inspection of each commercial motor vehicle being driven in interstate commerce;
  • drivers evaluate vehicle components for defects or deficiencies and see that necessary repairs are made prior to further use; and
  • motor carriers implement a systematic inspection program, with prescribed maintenance records, and keep parts and accessories in safe and proper operating condition.

The Federal regulations also provide for roadside inspections conducted by FHWA or state personnel.

Since 1970, Illinois’ Inspection of Vehicles law (625 ILCS 5/13-101 et. seq.) has required every owner of certain second division vehi­cles, medical transport vehicles, and tow trucks, to submit the vehicle to a “safety test” and secure a certificate of safety from the Illinois Department of Transportation (“Depart­ment”) before operating the vehicle upon Illinois highways.  Owners of a contract carrier transporting employees in the course of their employment on Illinois highways in a vehicle designed to carry 15 or fewer passengers are also included in the law.  

Vehicles Subject to Testing and Certificate Requirements

The law states that each second division motor vehicle that pulls or draws a trailer, semi trailer or pole trailer, with a gross weight of more than 8,000 lbs or is registered for a gross weight of more than 8,000 lbs, motor bus, religious organization bus, school bus, senior citizen transportation vehicle, and limou­sine shall be subject to inspection. 

Exceptions to the Inspection Law

The law does provide some relief for new (not used, see the following section on used) vehi­cles owned by dealers and manufacturers by exempting:

vehicles owned or operated by a manufacturer, dealer or transporter displaying a special plate or plates while such vehicle is being delivered from the manufacturing plant directly to the dealership, or being temporarily road driven for quality con­trol testing, or from one dealer or distributor to another, or are being moved by the most direct route from one location to another for the purpose of installing special bodies or equipment, or driven for purposes of demonstration by a prospective buyer with the dealer or his agent present in the cab of the vehicle during the demonstration; 

The Inspection law also exempts “second di­vision vehicles registered for a gross weight of 8,000 pounds or less”; unless the vehicles “pull or draw a trailer, semi-trailer or pole trailer having a gross weight of or registered for a gross weight of more than 8,000 pounds” or the vehicles are “motor buses; re­ligious organization buses; school buses; senior citizen transportation vehicles; medical transport vehicles [or] tow trucks.” 

Some of the other exceptions include:

•        farm tractors, machinery and implements, wagons, wagon-trailers or like farm vehi­cles used primarily in agricultural pursuits;

•        a semi trailer or trailer having a gross weight of 5,000 pounds or less including vehicle weight and maximum load;

•        recreational vehicles and house trailers equipped and used for living quarters; and

•        vehicles registered as and displaying Illinois permanently mounted equipment plates or similar vehicles eligible therefore but registered as governmental vehicles provided that if said vehicle is reclassified from a permanently mounted equipment plate so as to lose the exemption of not requiring a certificate of safety, such vehi­cle must be safety tested within 30 days of the reclassification; pole trailers and auxiliary axles; 

Sale of Used Vehicles by Dealers

Unfortunately, the Vehicle Inspection law provides that no dealer shall sell, transfer or exchange any used second division vehicle (as defined by the law) or medical transport vehicle unless it was tested and the Department issued a currently valid safety certificate.

 Dealers may still get relief from this require­ment if one of the previous exceptions apply (i.e. a pickup truck with a registered gross vehicle weight under 8000 lbs that does not pull any trailer). Furthermore, a dealer may sell, transfer or exchange any used second division vehicle or medical transport vehicle without a valid certificate of safety if the sale, transfer or exchange is for the purpose of restor­ing or repairing such vehicle to a condition in which it can pass the test for a certificate of safety, or for the purpose of junking.  Provided, however, that the used second division vehicle or medical transport vehicle is not moved under its own power to the location in which it will be restored, re­paired or junked.  

The Safety Test

In general, the safety test includes the testing and inspection of brakes, lights, horns, re­flectors, rear vision mirrors, mufflers, safety chains, windshields and windshield wipers, warning flags and flares, frame, axle, cab and body, or cab or body, wheels, steering apparatus, and other safety devices and appli­ances required by Illinois Vehicle Code (IVC) and such other safety tests as the Department may by rule or regulation require for the vehicles subject to inspection.  The passing of the safety test is not a bar to prosecution if the vehicle is unsafe as determined by the stan­dards prescribed in the IVC. 

With a few exceptions, tests shall be con­ducted at an official testing station within 6 months prior to the application for registration as provided for in the IVC.  Subsequently each vehicle shall be subject to tests at least every 6 months, and in the case of school buses at least every 6 months or 10,000 miles whichever occurs first, and according to schedules established by the Department.  Dealers may obtain a list of inspection stations in their area by calling the Depart­ment at 217-785-1181.

 The owner must display the Certificate of Safety on the vehicle in the manner prescribed by the Department.  If a test shows the vehicle is not in safe mechanical condition, the owner can not operate the vehicle on the highways until repaired and submitted to a retest at an official testing station.


Except as otherwise provided for in Chapter 13 of the IVC, no person shall operate any vehicle required to be inspected upon Illinois highways unless a certificate of safety then in effect is affixed to the vehicle.  Every person convicted of violating this Section is guilty of a Class C misdemeanor. 

The U.S. Department of Labor and NADA provide useful summaries of the laws and rules which affect how and when children can drive motor vehicles.  The Labor Department has published Fact Sheet #34: Important Changes in the Child Labor Laws Affecting the Driving of Automobiles and Trucks Under Hazardous Occupations Order #2.  NADA’s information may be obtained at by calling NADA directly at (703) 821-7000. 

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