Test Drives and Automobile Dealers

Test driving a vehicle is often the turning point that converts the shopper into a customer, but it is important to remember that risk exposure also accompanies this part of the sales process.

We have heard for years that “you cannot sell a vehicle unless you are in it.” While this is great sales advice, it is also great risk management advice. Even so, our records indicate that less than 60% of test drives are accompanied by a Sales Representative nationally. While this number has been steadily increasing over recent years, there is still room for improvement.

Driving down your exposure starts at the top with most dealerships having some sort of test drive controls in place. However, test drive controls are often not strictly enforced — generally stemming from senior management not regularly requiring adherence to the prescribed guidelines. Controlling your exposure is an area in which you can lead by example. The first steps should be to require good driving habits from those in your employ, and those who test drive your vehicles, employing staff experienced in conducting test drives, the review of staff drivers abstracts annually (at a minimum), and the resolve to take corrective measures when required. Some dealer groups have gone to the extent of requiring mandatory staff defensive driver training. While this practice is not yet widespread in the industry, the results are measurable and there have been fewer automobile claims at these dealerships.

We estimate that more than 80% of dealerships in Canada now request a customer’s driver’s licence prior to a test drive. It is important that this process be in place, and that every customer’s licence is reviewed prior to a test drive taking place. While driver’s licences are most often photocopied, many dealers are now using swipe readers to capture the data. Whichever way you are capturing the information, we need to remember in this era of privacy concerns that personal information captured by the dealership needs to be handled in accordance with applicable privacy legislation. If photocopying the driver’s licence, remember to attach it to a completed test drive form. Along with capturing the test driver’s privacy consent, the form also asks for information relevant to maintaining a test drive log — a useful tool in documenting and tracking test drive activity. Dealers should contact their insurance broker for a copy of a test drive form.

A 2010 study estimated that as many as 1 in 10 Ontario drivers were not properly licensed. This can stem from any number of things including a loss of licence, unpaid child support, unpaid municipal parking fines, outstanding toll highway bill, or simple failure to renew. With this in mind, dealers should be extra diligent prior to allowing the test drive of a vehicle; in most cases an unlicensed driver means no insurance coverage.

Every time one of your vehicles moves, your insurance policy and ultimately your business is at risk. It is vital that your risk management program include detailed test drive procedures. While it is not an area we focus on in great detail, technicians (vehicle repair/maintenance staff) should also be using a standardized test drive route when road testing customer vehicles.

We suggest a fairly simple list of steps in an effort to reduce exposure on test drives:

1. Qualify your customer – Are they likely to purchase a vehicle or are they just out for a drive?
2. Consider the timing – Weather conditions, traffic patterns, time of day, etc.
3. Review the customer’s licence – Actually look at the licence and check if it is currently valid. Are there any restrictions on the licence? Does the photo match the customer?
4. Notify another staff member that you will be accompanying the customer on a test drive and leave a copy of the completed test drive form with reception.
5. Always maintain control of the vehicle keys – the vehicle is not yet sold.
6. Use a standard test drive route – Use right hand turns only, avoid high traffic areas, include highway and city, etc.
7. Begin the test drive with the sales person behind the wheel as this is a good opportunity to demonstrate the features of the vehicle.
8. Switch drivers – At a halfway point, park the vehicle, remove the keys, switch positions with the customer, then reinsert the vehicle key.
9. Return the vehicle to a parking spot in front of the showroom, such that the vehicle will have to be moved later, thus identifying if there has been a key switch.

While accidents are impossible to prevent entirely, we can take a number of steps to help safeguard your dealership against unnecessary risk. Every staff member should be briefed on company policy regarding accidents and reporting. Each dealer plate pouch should include a liability card, and an accident reporting form. In the event of an accident, it is vital to collect the pertinent information for possible defense.

Driving down your exposure while promoting test drives is a balancing act, but with the right processes in place you can reduce your risk and protect your business.