Dealers often modify new vehicles with non-OEM accessories or parts, such as lift kits on trucks, because it’s what sells in their PMA or because the customer has asked for it. There has been an uptick in questions around whether certain aftermarket products void vehicle warranties. This article discusses the issues that may arise with using non-OEM accessories or parts.

Prior to getting into the nitty-gritty of warranty and indemnification issues, we want to remind dealers that any aftermarket products added to the vehicle by the dealer before the consumer shops for and purchases the vehicle must be included in the vehicle’s advertised price. Here’s an example of what the math might look like for a truck with an added lift package:

• MSRP of the truck: $50,000
• Discount available to all consumers: -$8,000
• Dealer-installed lift kit: +$5,000
• Processing/doc fees: +$800
• Dealer’s advertised total price: $47,800

Non-OEM Accessories Are Not Covered Under Manufacturer Warranty

In reviewing various dealer sales and service agreements, it appears that the vehicle warranty is not voided if non-OEM accessories and parts are installed on new vehicles. However, the non-OEM product would not be warrantied by the manufacturer and covered by the new vehicle warranty.

If Dealer modifies or sells a modified new Motor Vehicle, or installs any equipment, accessory, recycled part or part not supplied by [Manufacturer], or sells any non [OEM] service contract for a Motor Vehicle, Dealer will disclose this fact on the purchase order and bill of sale, indicating that the modification, equipment, accessory or part is not warranted by [Manufacturer] or, in the case of a service contract, the coverage is not provided by [Manufacturer] or an affiliate. (emphasis added)

The Company shall from time to time establish, by notice to the Dealer, the warranty applicable to each GENUINE PART. There shall be NO OTHER WARRANTY, express or implied, including any warranty of MERCHANTABILITY OR FITNESS, or any other obligation of the Company to the Dealer or the customer with respect to any GENUINE PART or any part thereof except the warranty established pursuant to this subparagraph. The Dealer shall expressly incorporate such warranty as a part of each sale of a GENUINE PART, in accordance with instructions set forth in the Warranty Manual.

Manufacturers typically only warrant their genuine parts and accessories. Therefore, all other parts and accessories are not warranted under their bumper-to-bumper warranty. So, even though the modification to the new vehicle will not void its warranty, it could cause other issues for the dealer.

The non-OEM part or accessory may have a warranty, but you need to check that vendor’s warranty to determine what it covers and any limitations it may have.

Violation of Dealer Agreement if Modification Affects Safety

It appears that if the dealer modifies the new vehicle with non-OEM accessories or parts that could adversely affect the vehicle’s safety, emissions or structural integrity, the dealer could be in violation of its agreement with its manufacturer.

DEALER agrees that it will not make any modifications to [Manufacturer] Products that may impair or adversely affect a vehicle’s safety, emissions or structural integrity.

For example, in the event of a rollover crash caused by a lift-kit suspension change on a truck, it is foreseeable that the OEM would not indemnify a dealer if someone injured in the rollover crash sues the dealer and the OEM. Such a liability suit puts your dealership and your relationship with the OEM at risk. Additionally, the OEM would claim breach of the DSSA. The customer and the OEM would argue that the lift kit altered the vehicle’s suspension, thereby compromising its safety.

In addition to not using non-OEM accessories or parts that would adversely affect safety, emissions or structural integrity, the dealer agreement could also provide that you would be in violation if those non-OEM accessories or parts adversely affected the mechanical operation of a motor vehicle.

Subject to the provisions set forth below, DEALER has the right to sell, install or use, for making non-warranty repairs, products that are not Genuine [OEM] Parts or Accessories. DEALER acknowledges, however, that its customers expect that any parts or accessories that DEALER sells, installs or uses in the sale, repair or servicing of [Manufacturer Motor] Vehicles are, or meet the high quality standards of, Genuine [Manufacturer] Parts or Accessories. DEALER agrees that in sales, repairs or servicing where DEALER does not use Genuine [Manufacturer] Parts or Accessories, DEALER will only utilize such other parts or accessories that will not adversely affect the mechanical operation of the [Manufacturer] Motor Vehicle being sold, repaired or serviced, and that are equivalent in quality and design to Genuine [Manufacturer] Parts or Accessories.

It is important to check your dealer sales and service agreement to determine whether any modification to a new vehicle could violate that agreement.

Notification of Non-OEM Products

If you use non-OEM accessories or parts, you may be required by the dealer agreement to notify customers, and possibly get specific consent, that the parts are non-OEM and not covered by the manufacturer’s warranty.

In order to avoid confusion and to minimize potential customer dissatisfaction, in any instance where DEALER sells, installs or uses other than Genuine [Manufacturer] Parts or Accessories, DEALER shall disclose such fact to the customer and shall advise the customer that these items are not included in warranties furnished by DISTRIBUTOR. Such disclosure shall be written, conspicuous and stated on the customer’s copy of the service or repair order or sale document. In addition, DEALER will clearly explain to the customer the extent of any warranty covering the parts or accessories involved and will deliver a copy of the warranty to the customer.

Dealer shall not represent as new, genuine [Manufacturer] Parts or as parts approved or authorized by the Company or the Manufacturer, any parts which are not in fact new, genuine [Manufacturer] Parts or parts expressly approved or authorized by the Company or the Manufacturer. Dealer will not, without the specific consent of the owner, install on any [Manufacturer] Vehicle any non-approved parts or accessories which may (a) affect the owner’s rights under any warranty applicable to the Vehicle or (b) create any unreasonable risk to motor vehicle safety.

Even if the dealer agreement does not require you to notify the customer, it may be good practice to notify consumers that non-OEM accessories and parts have been used on the new vehicle to avoid consumer claims of fraud or breach of contract. If the non-OEM accessories or parts are used and have a warranty, you may want to provide the consumer with that warranty information, since the parts will not be covered by the manufacturer’s warranty.

Manufacturer Indemnification

In the event that the non-OEM accessories or parts are alleged to result in a product claim or an injury claim, the manufacturer may have no obligation to indemnify you against these claims.

[Manufacturer] will assume the defense of Dealer and indemnify Dealer against any judgment for monetary damages or rescission of contract, less any offset recovered by Dealer, in any lawsuit naming Dealer as a defendant relating to any Product that has not been altered… (emphasis added)

Since using non-OEM accessories or parts could alter the vehicle, the manufacturer may have grounds to decline a request for indemnification in a product or injury claim. There is also a concern that, should there be an injury claim involving modified vehicles in which the consumer sues the dealer and the manufacturer, the manufacturer could seek indemnification from the dealer.

Insurance Coverage

If there is a product claim or personal injury claim that is the result of the non-OEM accessories or parts modification, your insurance company may have the right to deny coverage. If your dealership is in the practice of modifying new vehicles, you may want to put the insurance company on notice since that increases the carrier’s risk.

Conclusion

Although using non-OEM accessories and parts to modify new motor vehicles may not void the manufacturer’s warranty, vehicle modification could cause other issues. To minimize your dealership’s risk:

• Make sure you have checked your dealer agreement to determine whether you are in compliance with its language when modifying new vehicles.
• Make sure you are notifying consumers that the vehicle has been modified using non-OEM accessories and that those parts and accessories will not be covered by the manufacturer’s new vehicle warranty.
• Make sure you don’t need specific consent to install non-OEM parts.
• Make sure that the modifications do not result in any safety issues or adversely affect the mechanical operation of the vehicle in a way that could lead to product or personal injury claims, which could put your dealership at risk that the manufacturer will not indemnify or insurance may deny coverage.