COLORADO COLORADO MOTOR VEHICLE by linzhengnd

VIEWS: 158 PAGES: 28

									                 COLORADO




                 MOTOR VEHICLE
                    INDUSTRY
               LICENSE LAW MANUAL




October 2004
         Part I:                                 Auto Industry Division
                                                     The Auto Industry Division in the
    General Licensing                            Department of Revenue Enforcement
                                                 Business Group acts as the
      Information                                administrative and enforcement arm of
                                                 the Motor Vehicle Dealer Board in the
Motor Vehicle Dealer Board                       licensing and regulation of motor vehicle
    The industry was first regulated in          dealers, used motor vehicle dealers,
1945. The Motor Vehicle Dealer Board             wholesalers, wholesale auto auctions,
was created by the Colorado General              and salespersons. Activities include
Assembly in 1971. The Board consists of          processing of license applications and
nine members who have been residents of          fees, overseeing and auditing the written
the state for at least five years: three         examination process, providing
licensed new vehicle dealers, three              educational services to licensees and the
licensed used vehicle dealers, and three         public, working with consumers and
members from the public at large. The            licensees to resolve problems and
public members cannot have a present or          investigating complaints.
past financial interest in a motor vehicle       The Auto Industry Division also issues
dealership. All of the members are               licenses to and regulates motor vehicle
appointed by the Governor for three-year         manufacturers, distributors,
terms.                                           manufacturer representatives and buyer
    The Board is empowered to                    agents for the Director of the
promulgate, amend and repeal reasonable          Department of Revenue.
rules, regulations and provisions for
governing the industry.                          Testing Requirements
    The Board can issue or deny license             In accordance with state law all
applications for any motor vehicle dealer,       applicants must pass a written
used dealer, wholesaler, wholesale               examination. The examination is an open
auction dealer or salesperson. It can            book Mastery Exam. The applicant must
investigate any alleged or suspected             score 100% on the exam.
violation by any dealer, wholesaler,
wholesale auction dealer or salesperson.         License Types & Requirements
The Board can order an administrative                All licenses (new and used dealer,
hearing when it believes there is probable       wholesaler, wholesale auction dealer,
cause that a violation of law occurred. It       buyer agent and salesperson) expire
can also suspend and revoke the license          annually and must be renewed on or
of any motor vehicle dealer, wholesaler,         before the expiration date.
wholesale auction dealer or salesperson              Each dealer and salesperson license
after giving due notice and conducting an        is to be posted in a conspicuous place in
administrative hearing. The Board may            the dealer’s place or places of business.
also impose a fine of up to $10,000 for              Each license is separate and distinct.
each separate offense.                           It is a violation of law for any person to
    The Board is authorized to determine         exercise any of the privileges granted
license fees.                                    under a license that such person does
    The Board meets at least monthly to          not hold, or for any licensee to knowingly
transact normal business, review new             allow such an exercise of privileges by
applications and conduct hearings.               someone else. For example, a person




October 2004                                 2
licensed as a salesperson for a dealership         excess of the bond. Also, if a surety
cannot sell, offer or attempt to negotiate         pays out against a claim they will seek
the sale, exchange, or lease of a motor            reimbursement from the licensee.
vehicle for another dealership without
being duly licensed for said dealership. A         New Motor Vehicle Dealer
salesperson involved in such a sale would              A new motor vehicle dealer is a
be acting as an unlicensed salesperson.            person who, for commission or with
                                                   intent to make a profit or gain of
Surety Bonds                                       money or other thing of value, sells,
    Surety bonds protect citizens against          leases, exchanges, rents with option
illegal acts by licensees. For instance,           to buy, offers or attempts to negotiate
consumers could file a claim against a             a sale, lease or exchange of an
bond if a dealer failed to deliver title or        interest in new or used vehicles. A
did not honor a written agreement.                 dealer includes anyone engaged
However, the bonding company shall not             entirely or partially in the business of
be required to make any payment on a               selling or leasing motor vehicles,
claim until a final determination of fraud         whether or not such vehicles are
or fraudulent representation has been              owned by that person. Selling or
made by the board or by a court of                 leasing 3 or more new or new and
competent jurisdiction.                            used vehicles, or offering for sale or
    Bonds must remain in force                     lease more than 3 vehicles at the
throughout the licensed period. Similar to         same address or telephone number in
the license renewal process, bonds are             any one calendar year, shall be prima
renewed annually with the license                  facie evidence (evidence at face value)
renewal. The renewal may be done                   that a person is engaged in the
through a continuation certificate issued          business of selling or leasing motor
by the bond company.                               vehicles. A new motor vehicle dealer
    New and used vehicle dealers,                  includes an owner of real property
wholesalers, and wholesale auction                 who allows more than 3 new or new
dealers are required to have bonds in the          and used vehicles to be offered for
amount of $30,000. Salespersons, small             sale or lease on such property during
trailer dealers and buyer agents are               1 calendar year unless the property is
required to have bonds in the amount of            leased to a licensed dealer. New
$5,000.                                            motor vehicle dealer does not include:
    If someone suffers loss or damage              1. Receivers, trustees,
because of fraud or fraudulent                         administrators, executors,
representation made by a licensed dealer               guardians or other persons
or one of the dealer’s salespersons, that              appointed by or acting under the
person can file a claim or civil suit                  order of any court.
against the dealer, the salesperson and            2. Public officers performing their
the surety companies that bonded them.                 official duties.
The right of a person to recover for loss or       3. Employees of dealers.
damage against the dealer or the                   4. Wholesalers.
salesperson is not limited to the amount           5. Persons engaged in the selling of a
of their bonds. In other words, the dealer             new fire truck.
or salesperson can be personally liable            6. Motor vehicle auction dealers.
for any proven claim or judgment in




October 2004                                   3
 Used Motor Vehicle Dealer                          more than 4 motor vehicles that are
     A used motor vehicle dealer is any             collector’s items as defined in
 person who, for commission or with                 Colorado law.
 intent to make a profit or gain of money        7. Motor vehicle auction dealers.
 or other thing of value, sells,                 8. Tow company operators who sell
 exchanges, leases, or offers an interest           motor vehicles see 42-4-1800
 in used motor vehicles, or attempts to             through 42-4-1814 C.R.S. for
 negotiate a sale, lease or exchange, of            clarification.
 used motor vehicles. A used dealer is
 also someone who is engaged totally or          Wholesaler
 in part in the business of selling or               A wholesaler is a person who for
 leasing used motor vehicles, whether or         commission or with intent to make a
 not such vehicles are owned by such             profit or gain of money or other thing of
 person. Selling or leasing 3 or more            value, sells, leases, exchanges, offers or
 vehicles, or offering for sale or lease         attempts to negotiate a sale, lease or
 more than 3 vehicles at the same                exchange of an interest in new or used
 address or phone number in any 1                vehicles only to dealers, auction
 calendar year, shall be prima facie             dealers, and other wholesalers. No
 evidence that a person is in the                person can hold both a wholesaler’s and
 business of selling or leasing used             a motor vehicle salesperson’s license at
 vehicles. A used motor vehicle dealer           the same time. A wholesaler CANNOT
 includes an owner of real property who          employ salespeople. A wholesaler
 allows more than 3 used motor vehicles          CANNOT be licensed or conduct
 to be offered for sale or lease on such         business in his or her personal name. A
 property during 1 calendar year unless          wholesaler CANNOT sell to the public.
 the property is leased to a licensed
 dealer or auctioneer. Used motor                Licensing Requirements for New and
 vehicle dealer does not include:                Used Motor Vehicle Dealers and Whole-
 1. Receivers, trustees, administrators,         salers
     executors, guardians or other                  A complete application packet in-
     persons appointed by or acting under           cludes:
     the order of any court.                         The original application (DR 2109)
 2. Public officers performing their                 The addendum (DR 2109-B)
     official duties.                                Financial statement (DR 2114)
 3. Employees of used motor vehicle                 and               supporting
     dealers.                                       documents
 4. Wholesalers.                                     Partnership agreements or
 5. Lending institutions, such as banks             articles          of incorporation or
     or finance companies, which sell no            organization
     more than 12 repossessed vehicles               Place of business affidavit (DR
     in any one year. (The lending                      2044)
     institutions or secured parties shall           Dealer plate affidavit (DR 2630)
     not realize any moneys in excess of             Proof of state sales tax license, or
     the outstanding balance secured by                 completed application (CR 100)
     the loan or security agreement, plus            The payment of the appropriate
     costs of collection.)                              fees. (payable to Dept of Revenue)
 6. Persons who sell or exchange no                  A passing score of 100% on the




October 2004                                 4
       mastery exam.                                  or regulations.
     A $30,000 surety bond on the                 4. Having been convicted of or pled nolo
       approved form. The applicant’s                 contendere to any felony or any
       name and DBA must appear exactly               crime      pursuant to article 3, 4, or
       as licensed. It must be signed by              5 of Title 18, C.R.S. (felony or
       the owner, a partner, an officer of            criminal misdemeanor), or like crime
       the corporation or LLC manager.                pursuant to federal law or the law of
     If applying for a franchised license,           any other state. A certified copy of
       a franchise agreement on                       the judgment of conviction by a court
       manufacturer’s letterhead.                     of competent jurisdiction shall be
    Mail complete application packet to               conclusive evidence of such
    Department of Revenue, Auto Industry              conviction. A dealer, wholesaler, or
    Division, Denver, CO 80261-0016 or                officer/director/stockholder of a
    hand carry or Federal Express to:                 corporation, or LLC member/manager
    Department Of Revenue, Auto Industry              who is convicted of any felony or any
    Division, 1881 Pierce, Room 142,                  crime, must give the Board written
    Lakewood, CO, 80214.                              notice of such conviction within 30
                                                      days after receiving final judgment.
Liability Insurance Requirement                       The licensee is responsible for
   Motor vehicles cannot be operated on               providing complete information
public highways in Colorado unless the                including copies of final judgments
vehicle owner has insurance or a                      and pre-sentence reports.
certificate of self-insurance in full force.       5. Defrauding any buyer, seller,
Dealers must either be self-insured or                salesperson or financial institution to
have insurance for their vehicles.                    such person’s or institution’s
Owners of motor vehicles cannot operate               damage.
a vehicle on public highways or allow              6. Failing to perform - either
their vehicles to be operated on public               intentionally or negligently - any
highways unless there is a complying                  written agreement with any buyer or
insurance policy or certificate of self-              seller.
insurance in full force.                           7. Failing or refusing to furnish and
                                                      keep in force any required bond.
Grounds for Denial, Revocation or                  8. Making a fraudulent or illegal sale,
Suspension of a Dealer’s or Wholesaler’s              transaction or repossession.
License                                            9. Willfully misrepresenting, circum-
    The license of a new or used dealer,              venting, concealing or failing to
wholesale auction dealer, or wholesaler               disclose through whatever deception
may be denied, suspended, revoked or                  or device, any of the material
fined for the following:                              particulars required to be stated or
1. Unfitness of character or record of a              furnished to the buyer. A copy of the
    licensee or applicant relating to                 completed contract form and all other
    licensing, criminal or financial history          forms and documents required by law
    or current status.                                shall be given to the purchaser at the
2. Making a material misstatement in an               time of consummation of the sale of a
    application for license.                          motor vehicle. A dealer or wholesaler
3. Violating any of the terms and                     shall disclose on the contract form
    provisions of dealer law or Board rules           when a motor vehicle is known by the




October 2004                                   5
   dealer or wholesaler to have been                 the ownership or membership interest
   rebuilt from salvage or has sustained             of any corporation, limited liability
   any damage.                                       company or limited liability partnership
10.Intentionally publishing or circulating           holding a license must be reported to
   any advertising which is misleading or            the Board within 10 days of such
   inaccurate in any material particular             transfer.
   or which misrepresents any motor               -Any change in the name or trade name of
   vehicle products sold or furnished by a           the business must be reported by
   licensed dealer.                                  submitting a written notice to the
11.Knowingly purchasing, selling,                    Board at least 10 days prior to the
   acquiring or disposing of a stolen motor          change along with appropriate fee.
   vehicle.                                       -Any change in operating entity of a
12.Engaging in the business of a new or              licensee shall require a new
   used dealer without maintaining at all            application, fee and approval by the
   times a principal place of business               Board. A change of entity means a
   during reasonable business hours.                 change of business type - i.e., from a
13.Employing an unlicensed salesperson.              proprietor, partnership or corporation
14.Willfully violating any state or federal          to a different proprietor, partnership or
   laws respecting commerce or motor                 corporation.
   vehicles or any rules or regulations           -Any change in the site or location of a
   respecting commerce or motor vehicles             principal place of business shall
   adopted by any licensing or regulating            immediately be reported to the Board
   authority pertaining to motor vehicles.           in writing along with appropriate fee.
15.Representing or selling as “new” any           -Any change, addition, cancellation or loss
   motor vehicle that the dealer knows is            of a franchise shall immediately be
   a used motor vehicle.                             reported to the Board.
16.Violating any state or federal statute         -Any time a salesperson is discharged or
   or regulation dealing with odometers.             leaves a dealership, that dealer must
17.Selling to a retail customer a vehicle            immediately return that person’s
   which is not equipped or in proper                license to the Board. It is unlawful for
   condition and adjustment unless such              that person to act as a salesperson,
   vehicle is sold as a “tow away”, not to           until he or she is employed at another
   be driven.                                        dealership and a Change of Employer
18.Committing a fraudulent insurance                 Notification or a DR 2115 Salesperson
   act.                                              Application has been submitted to the
                                                     Board along with the appropriate fee.
    A wholesaler’s or wholesale auction
dealer’s license may also be denied,              Off-Premise Selling
suspended or revoked for selling, leasing,            A dealer shall obtain an off-premise
offering, or attempting to negotiate the          permit to offer, display and sell motor
sale, lease or exchange of an interest in         vehicles away from the dealer’s licensed
motor vehicles to persons other than new          place of business. A completed Off-
or used dealers, wholesalers or wholesale         Premise Permit Application (DR 2043)
auction dealers.                                  must be submitted along with the fee prior
                                                  to the event and shall list the location and
Requirements of Dealers                           date(s) of the sale. The permit shall be
-Any transfer of any percentage amount of         posted for inspection at the sale. No off-




October 2004                                  6
premise sales shall exceed six days,                  Any dealership which will not be
except for the National Western Stock             open for business for a period of at
Show, the Colorado State Fair, and the            least 2 weeks must post a clear and
Metro Denver Auto Dealers Association’s           legible sign on its place of business
annual Denver Auto Show. The permits              indicating this fact as well as notifying
for these 3 events cannot exceed 20 days.         the Board in writing.
Consecutive permits for the same location
are not allowed. Off-premise permits do           Sign In The Licensed Name
not negate the Sunday Closing Law.                The principal place of business and
                                                  additional locations of the dealer shall
Principal Place of Business and                   display a permanent sign with letters
Reasonable Hours Requirements                     at least 6 inches high, clearly visible to
    “Principal place of business” means a         the major avenue of traffic. The sign
site or location devoted exclusively to the       shall clearly display the licensed name
business for which a dealer is licensed           of the business.
and businesses incidental thereto. It
must have enough space to permit the              Other Location Requirements
display of one or more new or used                -The building or structure required to
vehicles and have a permanent enclosed                be on the principal place of business
building or structure large enough to                 shall have electrical service and
accommodate the dealer’s office and                   adequate sanitary facilities.
provide a safe place to keep the books and            “Adequate sanitary facilities” means
records of the business. The books and                a permanent sewer hookup,
records of each dealer, excluding                     cesspool or septic tank with
financial statements and tax returns,                 leaching field, or portable chemical
shall be open to inspection Monday                    toilet.
through Friday between 9 AM and 5 PM by           -The site must comply with all local
the Board and its agents and                          zoning ordinances.
representatives with cause, including             -In most cases, a room in a hotel,
ongoing investigation, compliance audit,              rooming house, apartment structure
sworn complaint, and order of the Board.              or part of any single or multiple unit
All records, including financial records              dwelling cannot be considered a
and tax returns, shall be provided to the             principal place of business, unless
Board upon a subpoena for those records.              the entire ground floor is devoted
    All new and used motor vehicle                    principally to and occupied for
dealers must be open for business at least            commercial purposes. The office of
3 days per week for a continuous period of            the dealer must be located on the
time not less than 4 hours per day                    ground floor.
between the hours of 8 AM and 9 PM. Any           -A dealer’s license can be suspended or
dealership open less than 40 hours a                  revoked if the principal place of
week must post a clear and legible sign on            business or additional locations are
its place of business indicating the days             not owned or leased by and not
and hours that it is open for business. In            actually occupied by the licensed
addition, such dealers shall notify the               dealer.
Board in writing of such hours and any
subsequent changes.




October 2004                                  7
 Motor Vehicle Salesperson                        Grounds for Denial, Revocation or
     Motor vehicle salesperson means any          Suspension of a Motor Vehicle
 natural person who, for a salary,                Salesperson’s License
 commission or compensation of any kind,             The license of a motor vehicle
 is employed either directly or indirectly,       salesperson may be denied, suspended,
 regularly or occasionally, by any new or         revoked or fined for the following:
 used dealer to sell, lease, purchase, or         1. Unfitness of character or record of
 exchange or to negotiate for the sale,              licensee or applicant relating to li-
 lease, purchase or exchange of motor                censing, criminal or financial his-
 vehicles. This includes general                     tory or current status.
 managers, sales managers and finance             2. Making a material misstatement on
 or insurance agents who sell or approve             an application for license.
 retail sales of motor vehicles.                  3. Failure to comply with any provision
                                                     of dealer law or any rule or regula-
 Motor Vehicle Salesperson Licensing                 tion adopted by the Board.
 Requirements                                     4. Engaging in the business without
 1. A complete application must be sub-              having a bond in force.
    mitted.                                       5. Intentionally publishing or
 2. The payment of the appropriate fee.              circulating any advertising that is
 3. A passing score of 100% on the                   misleading or inaccurate in any
    mastery exam.                                    material particular or which
 4. A $5,000 surety bond on the approved             misrepresents any motor vehicle
    form.                                            products sold or attempted to be
 5. Mail the application, fee (check pay-            sold by such salesperson.
    able to the Colorado Department of            6. Engaging in any fraudulent
    Revenue), proof of passing exam score            business practice.
    and bond to: Department of Revenue,           7. Selling, offering, or attempting to
    Auto Industry Division, Denver, CO               negotiate the sale, exchange, or
    80261-0016 or had carry to Depart-               lease of motor vehicles for any
    ment of Revenue, 1881 Pierce St.,                dealer for which a salesperson is
    Lakewood, Co.                                    not licensed.
                                                  8. Representing oneself as a
    Salespersons are not allowed to offer,           salesperson for any dealer when not
 negotiate, sell or lease vehicles unless            so employed or licensed.
 applications, complete in every respect,         9. To have been convicted of or pled
 bonds, fees and records of satisfactory             nolo contendere to any felony or any
 completion of written examinations have             crime pursuant to article 3, 4 or 5 of
 been submitted to the Board. Postmark               Title 18, C.R.S. (felony or criminal
 or date/time stamp shall be evidence of             misdemeanor), or like crime
 submission. Any person who has been                 pursuant to federal law or the law
 the subject of disciplinary proceedings             of any other state. A certified copy
 before the Board within the past 5 years            of the judgment of conviction by a
 shall not start selling or negotiating              court of competent jurisdiction shall
 until the Board has reviewed and                    be conclusive evidence of such
 approved the application.                           conviction in any hearing. A




October 2004                                  8
   salesperson who is so convicted, must          is a fee to change employers (check fee
   give the Board written notice of such          schedule for required fee). The
   conviction within thirty (30) days after       salesperson may begin selling as soon
   receiving final judgment of the court.         as the completed transfer form and fee
   Licensee is responsible for providing          is submitted to the Auto Industry
   complete information including copies          Division, unless the applicant has been
   of final judgments and pre-sentence            the subject of disciplinary proceedings
   reports.                                       before the Dealer Board within the last
10.To have knowingly purchased, sold or           5 years. It is unlawful for such
   otherwise acquired or disposed of a            salesperson to act as a motor vehicle
   stolen motor vehicle.                          salesperson until a new license is
11.Employing an unlicensed salesperson.           procured.
12.Violating any state or federal statute             Dealers are responsible for their
   or regulation dealing with odometers.          sales staff. When a salesperson leaves
13.Defrauding any retail buyer to that            a dealer, that dealer must confiscate
   person’s damage.                               the license and return that
14.Representing or selling as “new” any           salesperson’s license to the Auto
   motor vehicle that the salesperson             Industry Division. A new bond is not
   knows is a used motor vehicle.                 required when a salesperson changes
15.Selling to a retail customer a vehicle         dealerships during the license year.
   which is not equipped or in proper
   condition and adjustment, unless               Multiple Dealerships/Additional Li-
   such vehicle is sold as a tow away, not        censes
   to be driven.                                     Salespersons may work for more
16.Willfully violating any state or federal       than one dealership. However, a
   law respecting commerce or motor               separate application, bond and fee
   vehicles or any lawful rule or                 must be submitted for each dealership.
   regulation respecting commerce or              Employing dealers need to check the
   motor vehicles adopted by any                  “Additional License” box on the
   licensing or regulating authority              Salesperson Application (DR 2115).
   pertaining to motor vehicles.                  Each “Additional License” application
17.Improperly withholding,                        must be completely filled out. Each
   misappropriating, or converting to             employing dealer must be aware of the
   one’s own use any money belonging to           salesperson’s employment at other
   customers or other persons, received           dealerships.
   in the course of employment as a
   motor vehicle salesperson.                     Buyer Agent
                                                      A buyer agent is any person who is
Changing Dealerships                              retained or hired by a consumer for a
   A salesperson may change dealerships           fee or other thing of value to assist,
during the licensing year. A Change of            represent, or act on behalf of that
Employer Notification form or a DR2115            consumer in purchasing or leasing a
Salesperson Application must be                   motor vehicle. Buyer agents are
completed and signed by the dealer and            licensed by the Director of the
the salesperson and submitted to the              Department of Revenue.
Auto Industry Division. A salesperson                 A consumer is defined as a
must have a current bond on file. There           purchaser or lessee of a motor vehicle




October 2004                                  9
to be used primarily for business,                 includes trailers. In brief, motor
personal, family, or household purposes. It        vehicles under Colorado law are
does not include the buyer of a motor              automobiles, motorcycles, motor homes,
vehicle that is purchased primarily for            recreational vehicles, semi-trailers,
resale.                                            trailers and trucks. Exceptions are:
   A buyer agent does not include a                agricultural equipment such as farm
person whose business includes the                 tractors, fire fighting apparatus, special
purchase of motor vehicles primarily for           mobile machinery or self-propelled
resale or lease. A buyer agent is not to be        construction equipment, all-terrain
employed by, or receive a fee from a motor         vehicles and motorized bicycles. Travel
vehicle dealer, salesperson or                     trailers more than 40 feet in length or
manufacturer. A buyer agent cannot                 more than 8 feet wide are considered
advertise the sale of, or sell the                 mobile homes.
consumer’s vehicle to the general public.
   A $5,000 surety bond is required of all         New Vehicles
buyer agents. It must be on a form                    New vehicle means any motor
approved by the Colorado Attorney                  vehicle being transferred for the first
General. All bonds must be renewed                 time from a manufacturer or dealer. It
annually. The renewal may be done                  has not been used and is what is
through a continuation certificate issued          commonly known as “new” and is still
by the surety.                                     on a Manufacturer’s Certificate of
                                                   Origin (MCO). Vehicles having a gross
   It is unlawful for buyer agents to:             vehicle weight rating of 16,000 lbs. or
1. Make a material misstatement on an              more are exempt from this definition.
   application for a license.                      A vehicle used by a dealer for
2. Willfully fail to perform any written           demonstration purposes is considered to
   agreement.                                      be a new vehicle until such
3. Defraud any buyer, seller, motor                demonstration use has exceeded 1500
   vehicle salesperson, or financial               miles. Verifiable in-transit miles are
   institution.                                    not included in the 1500 demonstration
4. Intentionally enter into a financial            mile limitation. In-transit miles must be
   agreement with a seller of motor                carefully documented in a dealer-
   vehicles for the buyer agent’s own              signed affidavit.
   benefit.                                           A new vehicle can only be sold by a
5. Coerce any motor vehicle dealer into            Colorado licensed new motor vehicle
   providing installment financing with a          dealer that is franchised by that
   specified financial institution.                vehicle’s manufacturer. New vehicles
                                                   may be exchanged between dealers
                                                   franchised to sell the same make of
  Part II: New Vehicles                            vehicle. Only wholesalers or new
                                                   vehicle dealers franchised by
Motor Vehicle                                      manufacturers to sell their motor
    Motor vehicle means every vehicle that         vehicles will be allowed to sell new
is self-propelled or is designed to be             motor vehicles, and only then if they
attached to or be drawn by a self-propelled        have not previously been sold except by
vehicle and intended primarily for use and         the manufacturer to such dealer. All
operation on the public highways. This             vehicles that do not qualify as “new”




October 2004                                  10
are considered “used”.                             constitutes a separate offense.

Manufacturer’s Certificate of Origin               Supplemental Dealer Label
(MCO)                                               (Dealer Addendum)
    This document is required from a                  This label lists any dealer-added or
manufacturer for each vehicle produced.            deleted equipment, services, etc. Any
It specifies the vehicle make, model,              cost differences from the Monroney
body type, date of manufacture, or date            Label must be listed here. It must
of transfer from manufacturer, model               appear and remain in the window until
year, shipping weight, 17-character                the vehicle is delivered to the
Vehicle Identification Number (VIN), and           purchaser.
manufacturer’s invoice number. If the
vehicle is a truck or commercial vehicle,          Transfer of Title - New Vehicles
the gross weight rating is also specified.            The buyer of a new vehicle must be
The number of cylinders of the engine              given:
and the S.A.E. horsepower rating are               -Manufacturer’s Certificate of Origin
included when the vehicle is self-                    assigned to the purchaser and
propelled.                                            Dealer’s Bill of Sale if all the
    The MCO provides space for the name               assignments are full
and address of the dealer to whom the              -Application for Title (DR 2411)
vehicle is being transferred and an                −State sales tax receipt (DR 0024)
assignment form for transfer from dealer           -State’s Required Disclosure Form
to buyer. The assignment forms have a              -Copy of complete Buyer’s Order
place for the notation of lien information.        -Copy of any other document signed by
MCO’s must be printed on authorized                   the consumer
secure banknote paper.                             -Certificate of Emissions Compliance
                                                      (CEC), if the vehicle is self-
Monroney Label                                        propelled, gas or diesel-powered and
    This federally mandated label lists               being registered in the AIR Program
the Manufacturer’s Suggested Retail                   area.
Price (MSRP), which serves as a
benchmark price on all new vehicles. It            Disclosures Required as Part of a
also lists the standard equipment,                 Motor Vehicle Sales Contract
options, and transportation charges. It               The following disclosures are
also indicates the final assembly point,           required by Colorado Law as part of a
delivery point, receiving dealer, make,            motor vehicle sales contract. These
model and Vehicle Identification Number            disclosures will appear on a separate
(VIN).                                             form unless the buyer has been given a
    This label cannot be altered by the            copy of the completed retail installment
dealer or removed until the vehicle is             contract that includes the necessary
delivered into the actual custody and              disclosures. Both the dealer and the
possession of the ultimate purchaser.              buyer are to initial the provisions, which
The penalty for removing, altering or              incorporates them into the contract to
rendering illegible the Monroney label             purchase a motor vehicle.
can be a fine up to $1,000 or                         A. IMPORTANT NOTICE: The papers
imprisonment of not more than one year             you are signing as part of this motor
or both. Each vehicle affected                     vehicle sale are legal documents.




October 2004                                  11
You should read them carefully and if            until the vehicle is returned to the
there is anything you do not understand,         dealer. If the contract is canceled, it may
you should seek legal assistance.                require you to immediately return the
    B. WARNING: Only the terms and               vehicle to the dealer and to pay the cost
conditions written into these documents          of repair for any damage occurring to the
are part of the contract. Be sure that           vehicle while it is in your possession
any oral representations are also written        along with the agreed upon daily and
into these documents, otherwise they             mileage charges. The contract may also
cannot be enforced.                              give the dealer the right to take the
    C. Any fraud or misrepresentation in         vehicle from you 24 hours after
a motor vehicle sale is punishable under         cancellation and demand for the vehicle’s
Colorado State Law.                              return. You may also be required by the
    D. The contract is for cash. It              contract to pay any costs the dealer may
requires you to pay the dealer                   have to pay in regaining possession of the
$_________, the total balance due after          vehicle. If you owe any money from daily
your trade-in and/or deposit(s) are              and mileage charges, damage repair
deducted. Failure to pay this amount by          costs or repossession costs to the dealer
_______________ may result in the loss of        when the vehicle is returned, the dealer
any deposit(s) you have paid and/or your         may keep your deposit(s) up to the
trade vehicle.                                   amount owed. Otherwise the deposit
                     OR                          must be returned unless you have agreed
    Dealer has agreed to arrange                 that it is nonrefundable.
financing for you and you agree to buy
the motor vehicle if financing can be
arranged at an interest rate that does
not exceed ______% annual percentage
rate. At this percentage rate your
                                                   Part III: Used Motor
monthly payments would be ______ per
month for _____ months, until paid in
                                                          Vehicles
full, assuming a down payment or trade
worth _________. This annual percentage          Used Motor Vehicles
rate must be agreed upon by both you                 A used motor vehicle is defined as any
and the dealer. Also, you are entitled by        motor vehicle which has been sold,
law to a complete, written disclosure of         bargained, exchanged, or given away, or
all the loan terms and the contract is           the title transferred from the person who
not binding until you receive such a             first took title from the manufacturer or
disclosure and accept the loan terms             importer, or so used as to have become
disclosed.                                       what is commonly known as a
    E. You and the dealer have agreed            secondhand motor vehicle. In the event
that the vehicle will be delivered to you        of transfer on the certificate of origin
prior to the purchase price being paid in        from the original franchised dealer to
full. If financing cannot be arranged at         any other dealer or individual (other than
the terms stated in the contract, and the        a franchised dealer of the same make of
contract is canceled, you agree to pay           vehicle), the vehicle shall be considered
the dealer $________ dollars per day and         a “used” motor vehicle and must be titled
________ cents per mile for your use of          in the new owner’s name.
the vehicle from the date of delivery                A vehicle which has been used by a




October 2004                                12
dealer for demonstration to prospective                but must be returned as soon as the
customers shall be considered a used                   test is over.
vehicle if such demonstration use has               -Failure to display or complete the
been for more than 1500 miles, excluding               Buyer’s Guide or “as is” sticker can
verifiable in-transit miles. Demonstrators             result in a maximum fine of $10,000
and other vehicles which have been used                per vehicle, per day.
by a dealer prior to their sale shall be
titled in the dealer’s name and sold as             Transfer of Title - Used Vehicles
used vehicles. Lease vehicles are                       The following documents are required
considered used because the lessor has              in the sale of a used vehicle:
taken title. All vehicles which do not              -Properly assigned Certificate of Title
qualify as “new” are considered to be               -Application for Title (DR 2411)
“used”.                                             -Signed Mileage Disclosure Affidavit (DR
                                                        2403) if the certificate of title is “non-
FTC Buyer’s Guide                                       conforming” (i.e., does not contain an
    Since 1985, the Federal Trade                       odometer disclosure statement for
Commission’s Used Car Rule has required                 the Federal Truth In Mileage Act)
that dealers prominently and                        -Dealer Bill of Sale if title is non-
conspicuously display the “Buyer’s Guide”               conforming
on every used car or light truck offered for        -State sales tax receipt (DR 0024 if sold
sale. “Vehicle” includes all motorized                  or DR 0026 if the vehicle is being
vehicles with a gross vehicle weight of                 leased).
under 8,500 lbs., a curb weight under               -Copy of complete Buyer’s Order
6,000 lbs., and less than 46 square ft. of          -FTC Buyer’s Guide
frontal area. Motorcycles are excluded.             -If the vehicle is on an out-of-state title,
    Rule highlights include:                            the dealer must also complete the
-The Buyer’s Guide must be the exact                    Colorado Dealer’s Statement
    format required by the Rule.                        Concerning an Out-of-State Vehicle
-It must be filled out according to the                 (DR 2418) and Verification of VIN (DR
    Rule’s directions.                                  2087)
-A copy of the Buyer’s Guide must be                -State’s Required Disclosure Form
    given to the purchaser at the time of           -Copy of any other document signed by
    sale.                                               the consumer
-The information on the final version of            -A Certificate of Emissions Compliance
    the Buyer’s Guide must be                           (CEC), if the vehicle is self-propelled,
    incorporated into the contract of sale              gas or diesel-powered and being
    for each vehicle sold.                              registered in the AIR Program area.
-If a used car transaction is conducted in
    a language other than English, a                Lease Vehicles
    version of the Buyer’s Guide in that                The Federal Consumer Leasing Act
    language must be provided to the                applies to personal property leased by an
    consumer.                                       individual for a period of more than 4
-The Buyer’s Guide must be displayed                months for personal, family or household
    prominently and conspicuously on the            use. Motor vehicle leasing companies
    vehicle and in such a fashion that both         are required by Colorado law to be
    sides are easily readable. It can be            licensed as used motor vehicle dealers.
    temporarily removed for a test drive,           The Federal Reserve Board’s Regulation




October 2004                                   13
M covers leasing rules and disclosures.
                                                  Colorado Attorney General and the
Advertising of Lease Vehicles                     Federal Trade Commission also monitor
   Federal law (Regulation M) regulates           motor vehicle advertising for violation of
the advertising of leases in Colorado. If         state and federal laws and regulations.
an advertisement promoting consumer                   To intentionally publish or circulate
leasing on motor vehicles contains any of         any advertising which is misleading or
the following:                                    inaccurate in any material particular or
-The amount of any payment.                       which misrepresents any of the products
-A statement of any capitalized cost              sold or furnished by a licensed dealer is
   reduction or other payment required            a violation of state law and can subject a
   prior to or at consummation or by              dealer’s license to suspension,
   delivery, if delivery occurs after             revocation or fine.
   consummation.                                      Advertising is defined as any
                                                  commercial message in any newspaper,
   Then the following terms must be               magazine, leaflet, flyer or catalog, on
disclosed:                                        radio, television or public address
-That the transaction advertised is a             system, in-direct mail literature or other
   lease.                                         printed material, on any interior or
-The total amount due prior to or at              exterior sign or display, computer
   consummation or by delivery, if                display, in any window display, on any
   delivery occurs after consummation.            point-of-transaction literature or price
-The number, amounts and due dates or             tag, other than state or federal
   periods of scheduled payments under            mandated disclosures, which is delivered
   the lease.                                     or made available to a customer or
-A statement of whether or not a                  prospective customer in any manner
   security deposit is required.                  whatsoever.
-A statement that an extra charge may                 The dealer is responsible for taking
   be imposed at the end of the lease             written action to attempt to correct
   term where the lessee’s liability (if          misleading advertising placed by a
   any) is based on the difference                manufacturer if the advertisement
   between the residual value of the              contains the dealer’s name.
   leased property and its realized value             The following 16 advertising rules are
   at the end of the lease term.                  regulations adopted by the Dealer Board
                                                  over the years to meet the two objectives
                                                  of consumer protection and a “level
Part IV: Motor Vehicle                            playing field.”
                                                      Advertising shall be considered
      Advertising                                 misleading or inaccurate in the following
                                                  particulars:
   Advertising generates numerous
                                                  1. Advertising a motor vehicle which is
complaints. Consumer protection and the
                                                     not in operable condition unless
maintenance of a “level playing field” are
                                                     specifically disclosed.
the main reasons for the Dealer Board’s
                                                  2. Advertising which would imply the
regulation of dealer advertising. In
                                                     dealer is going out of business when
addition to the Dealer Board’s staff, the




October 2004                                 14
     such is not the case.                           9. Advertising or making statements
3.   Advertising a specific motor vehicle for           that are not true or that cannot or
     sale or lease with price or terms                  will not be honored. Advertising
     quoted, without fully identifying the              which creates the false impression
     vehicle as to year, make, model and                that the purchaser will determine
     dealer stock number. Such vehicle                  the terms, price or conditions of a
     shall be willfully shown and sold at the           sale, such as “write your own deal,”
     advertised price and/or terms while                “name your own price,” “no
     such vehicle remains unsold or                     reasonable offer refused,” and “we
     unleased, for a period of five days                will not be undersold.” Advertising
     following the last date the ad was                 any item as “free” which is
     published, unless the ad states that               associated with or conditioned upon
     the advertised price and terms are                 the negotiated sale of a motor
     good only for a specific time and such             vehicle.
     time has elapsed. If a specific number          10.Advertising sales prices for used
     of motor vehicles is advertised, such              motor vehicles which claim or imply
     vehicles must have been invoiced to                a specific savings or discount
     the dealer.                                        without clearly and accurately
4.   Using a picture or photograph of a                 documenting the basis for the
     vehicle in advertising when the picture            savings or discount.
     or photograph is not the same make,             11.Advertising any reference to “dealer
     year and equipment actually being                  cost” or “invoice” price. Advertising
     offered for the price or terms                     the word “wholesale” in connection
     advertised.                                        with the retail offering of motor
5.    Advertising in such a manner which                vehicles.
     utilizes an asterisk or other reference         12.Advertising a specific trade-in
     symbols to contradict or materially                amount or range of amounts
     change the meaning of any advertising              without, in fact, offering such a
     statements.                                        trade-in amount and, failing to
6.    Advertising used motor vehicles to                disclose or advertise the M.S.R.P.,
     create the impression that they are                sale price, or capitalized cost of the
     new or using the word ‘new’ when                   vehicle from which the trade-in will
     advertising used vehicles, such as                 be deducted.
     ‘new,used cars’. Any vehicle of the             13.Advertising the price of a vehicle
     current model or the previous model                without including all costs to the
     year which is a used vehicle shall be              purchaser at the time of delivery,
     so identified in any advertisement for             except sales tax, finance charges,
     said vehicle.                                      cost of emissions test, and
7.    Advertising motor vehicles which are              transportation costs, incurred after
     known by the dealer to be salvage or               sale, to deliver the vehicle to the
     rebuilt from salvage, taxi cabs, flooded           purchaser at the purchaser’s
     vehicles or police vehicles, which are             request.
     not so identified in the advertisement.         14.Advertising any specific discount or
8.    Advertising in any manner to imply                rebate on new motor vehicles
     that a purchaser will be receiving                 without the manufacturer’s
     benefits of any existing loan on a                 suggested retail price conspicuously
     vehicle when no such benefit exists.               stated in the ad.




October 2004                                    15
15.Advertising any qualifying statement           accompanied by one or more of the
   or disclosure which is not clear,              following practices:
   conspicuous, and readable, and                 1. Refusing to show the product
   which is not adjacent to the offer or              advertised.
   terms it qualifies, and in less than           2. Disparaging in any respect the
   eight-point type.                                  advertised product (such as; “This is
16.Advertising any contest that offers to             only a 4-cylinder model. You really
   prospective participants the                       need the V-6 that costs a little
   opportunity to receive or compete for              more.”).
   gifts or prizes without such                   3. Requiring that tie-in sales or other
   advertisement containing the words                 undisclosed conditions be met prior
   “no purchase or payment of any kind                to selling the advertised product or
   is necessary to enter or win this                  service (such as; “You must commit
   contest” in bold-faced type and at                 to a one-year service contract with
   least ten-point type.                              XXYYZZ Company.”).
                                                  4. Refusing to take orders for the
Advertisement - Inclusion of Dealer                   product advertised.
Name.                                             5. Showing or demonstrating a
    No dealer or any agent of a dealer                defective product that is unusable or
shall advertise any offer for the sale,               impractical for the purpose set forth
lease, or purchase of a new or used                   in the advertisement.
vehicle that creates the false                    6. Accepting a deposit for the product
impression that the vehicle is being                  and subsequently switching the
offered by a private party. The                       purchase order to a higher priced
advertisement must contain the                        item.
licensed name of the dealer or the word           7. Failing to make deliveries of the
“dealer.” If the name of the dealer does              product within a reasonable time or
not clearly reflect that the business is a            to make a refund thereof.
dealership, both the licensed name of
the dealer and the word “dealer” must                 A person commits a class 2
appear in the ad. For example, a dealer           misdemeanor if, in the course of
using the name “ABC Enterprises”                  business, he or she knowingly “makes a
cannot simply use his or her licensed             false or misleading statement in any
name in an ad. Since “ABC Enterprises”            advertisement addressed to the public
does not identify the advertiser as a             or a substantial segment thereof for the
dealer, the word “dealer” also has to             purpose of promoting the purchase or
appear in the ad.                                 sale of property or services”. A class 2
                                                  misdemeanor carries a minimum
Bait & Switch Advertising                         penalty of 3 months in jail or $250 fine
   Colorado’s Consumer Protection Act             or both, and a maximum penalty of 12
declares “bait and switch” advertising to         months in jail or $1,000 fine or both.
be a deceptive trade practice. A dealer           The Criminal Code also defines “bait
employs “bait and switch” when                    advertising” and declares it to be a class
advertising is accompanied by an effort           2 misdemeanor.
to sell a product other than what was
advertised, or on terms other than what           Truth In Lending Act
was advertised and which is                          The Federal Reserve System and the




October 2004                                 16
Federal Trade Commission are two                  transfer motor vehicles by using one of
agencies involved with enforcement of             the multiple reassignments on the
Federal Regulation Z which sets                   back of the title. Four reassignments
advertising disclosure rules for closed-          are allowed on the Certificate of Title.
end credit sales and loans. If an                 If a dealer takes possession of the
advertisement promoting closed-end                vehicle on the last reassignment line,
credit on motor vehicles contains any of          then, that dealer MUST establish title
the following triggering terms:                   in its name by getting a new title in
-The amount of the down payment                   the dealer’s name.
   expressed either as a percentage or                The sale or transfer of a new
   dollar amount.                                 vehicle requires a dealer franchised by
-The amount of any payment expressed              that vehicle’s manufacturer, to
   either as a percentage or dollar               transfer a good and sufficient
   amount.                                        Manufacturer’s Certificate of Origin to
-The number of payments.                          the buyer. If a “new” vehicle has been
-The period of repayment.                         assigned to a franchised dealer on an
-The amount of any finance charge.                MCO and it goes over 1500
                                                  demonstration miles, it must be titled
   Then the following items must be               as a “used” vehicle in the name of the
disclosed:                                        dealership prior to sale.
-Amount or percentage of the down                     Dealers are responsible for
   payment.                                       delivering titles in a timely manner to
-Terms of repayment.                              the buyer or lien holder. In order to
-Annual percentage rate using that term           facilitate initial registration of a
   spelled out in full.                           vehicle, a dealer shall have no more
                                                  than 30 days from the date of the
    The following are some examples of            sale to deliver or facilitate the
terms, which by themselves do NOT                 delivery of a title to a buyer or lien
trigger the required federal disclosures:         holder (TITLE MUST BE DELIVERED
no down payment, easy monthly                     IN 30 DAYS).
payments, terms to fit your budget, and               “Dealer Resale” titles do not
financing available.                              require sales tax to be paid. A dealer
                                                  resale title cannot be obtained on any
  Part V: Titles, Plates                          vehicle subject to any lien. Any
                                                  licensed Colorado dealer or wholesaler
     & Registration                               may a obtain a “quick” title in the
                                                  licensed name of the dealership or
        Permits                                   wholesaler.
                                                      Vehicles titled out-of-state do not
Title Law                                         require the dealer to obtain a Colorado
    As long as a properly assigned and            Certificate of Title as long as the title
titled motor vehicle remains in a dealer’s        does not prohibit separate
inventory and at his/her place of                 reassignments. The first Colorado
business for sale, and for no other               dealer must complete the “Verification
purpose, the dealer is not required to            of VIN” (DR 2087) and “Colorado
secure a Certificate of Title. Dealers can        Dealers Statement Concerning an




October 2004                                 17
Out-of-State Vehicle” (DR 2418).                 following locations: motorcycle - on the
    Licensed new and used dealers may            frame in a visible location; Class A
obtain a Duplicate Colorado Certificate          manufactured motor home - on the
of Title for a vehicle that has been             main entrance door jamb; trailer -
“traded-in” for which the owner has lost         adjacent to the public VIN; all other
the title, by submitting the following:          motor vehicles - on the body post to
-Completed Duplicate Title Application           which the driver’s door latches, also
    (DR 2539-A)                                  known as the driver’s door B pillar.
-Proof of dealer’s license or a letter of            Once a salvage vehicle has been
    authorization from a licensed dealer.        repaired, stamped and a Certificate of
-A Power of Attorney signed by the               Title is issued, that title and all
    vehicle’s owner(s) in favor of the           subsequent titles will be branded with
    dealership                                   the words “rebuilt from salvage”.
-A lien release if necessary                         Any person who sells a salvage
-Payment of the fee.                             rebuilt vehicle must disclose in written
                                                 form that the vehicle has been rebuilt
Salvage Certificate of Title                     from salvage.
    This document is issued by the                   Board regulations require dealers,
State Motor Vehicle Division to indicate         wholesalers and auction dealers to
ownership of a salvage vehicle. A                disclose on the contract form when a
salvage vehicle means a vehicle that is          motor vehicle is known by the dealer,
damaged by collision, fire, flood,               wholesaler or auction dealer to be a
accident, trespass or other occurrence -         salvage vehicle. This requirement can
excluding hail damage - to the extent            be satisfied by using a “Rebuilt From
that the cost of repairing the vehicle to        Salvage Disclosure” affidavit (DR 2710).
a roadworthy condition and for legal             The Board also requires a written
operation on the highways exceeds the            disclosure when a motor vehicle is
vehicle’s retail fair market value               known to have sustained material
immediately prior to such damage, as             damage at any one time from any one
determined by the person who owns the            incident.
vehicle at the time of such occurrence               Intentionally removing or altering a
or by the insurer or other person acting         salvage brand or possessing a motor
on behalf of such owner. These vehicles          vehicle without retitling the vehicle
cannot be transferred on a Dealer’s Bill         with a salvage brand for 45 days after
of Sale (DR 2407).                               learning that the motor vehicle’s
   An owner of a salvage motor vehicle           salvage brand may have been removed
that has been made roadworthy who                or altered is a class 1 misdemeanor.
applies for a certificate of title shall
include a certified VIN inspection,              Mechanic’s Lien
DR2704, performed by a law                           A garage or mechanic holding a
enforcement officer certified as a VIN           vehicle for a mechanic’s or storage lien
inspector. Prior to inspection, the owner        may make application for title by
shall stamp into the motor vehicle the           following the steps in the mechanics
words “REBUILT FROM SALVAGE” with                and storage lien procedure 38-20-116
each letter being not less than one-             C.R.S.
fourth inch in size. Such words shall be
a salvage brand and be stamped in the




October 2004                                18
 Possession Documents                                use” dealer plates. The private use
     Dealers must have one of the                    prohibition, which applies to dealer
 following documents for every vehicle in            demo plates, does NOT apply to the full-
 their possession:                                   use plates. However, these plates are
 1. A Manufacturer’s Certificate of Origin           more expensive than dealer demo
     in the dealer’s licensed name for               plates. Once qualified, a dealer may
     each new vehicle in stock. No dealer            purchase as many full-use plates as
     shall hold a Certificate of Origin as           desired. Full-use plates may be used
     evidence of ownership unless                    only for vehicles owned and offered for
     franchised to sell that specific make           sale by the dealer or wholesaler. They
     of vehicle.                                     cannot be used on any motor vehicles
 2. A properly assigned certificate of title         used by the dealership for commercial
     for used vehicles.                              purposes such as tow trucks or parts
 3. If the title or MCO has been                     pickup/delivery vehicles. Such
     surrendered to a bank or financing              commercial vehicles must be titled and
     organization or any other person as             registered in the name of the
     collateral, the dealer or wholesaler            dealership.
     must have in their possession
     evidence of the location of the title or        Rules Governing Dealer Demonstra-
     the MCO. This                                   tion Plate Use
     evidence must be acceptable to the                  Any licensed Colorado dealer may
     Director of Revenue.                            permit the use of dealer demo plates
 4. A written consignment agreement.                 upon any vehicle owned by the
                                                     dealership and operated by the owner
     Dealers can be cited for a violation of         or by any employees authorized by the
 Titles Regulations if any title in their            dealer to use such vehicles for
 possession is not properly assigned to the          legitimate dealership business. These
 dealership (also referred to as “open               vehicles are to be available daily for
 title”). Vehicles without one of the above          inspection and sale at the dealership
 documents must not be offered for sale.             during normal business hours. C.C.R.
                                                     204-14 prohibits any “private use” of a
 Demonstration Plates                                vehicle bearing dealer demo plates.
     Dealer demo plates are issued to                    A dealer demo plate may be used
 licensed Colorado new and used dealers              upon any vehicle owned by or consigned
 and wholesalers. These plates are used              to the dealer that is being offered for
 instead of registering each vehicle in the          sale and operated by a prospective
 dealer’s inventory separately. Dealer               buyer for demonstration purposes. The
 demo plates are not assessed specific               demonstration cannot exceed 7 days. It
 ownership tax. Newly licensed                       may also be used to transport a dealer-
 wholesalers will be authorized the first            owned vehicle from the point of
 dealer demo plate upon Board approval of            purchase to the dealership. Vehicles
 the application.                                    consigned in writing to the dealership
                                                     and being operated by a prospective
 Full-Use Plates                                     buyer for demonstration purposes may
    Any dealer or wholesaler, who has                also display a dealer demo plate.
 sold 26 or more vehicles in the preceding                Dealer demo plates may not be
 12 months, may apply and obtain “full-              placed on a vehicle that has been sold




October 2004                                    19
 and is in possession of the purchaser, or         transport vehicles owned by new and
 upon any vehicle leased or rented by the          used dealers and wholesalers from the
 dealer. These plates shall not be used            point of purchase to the point of storage,
 on vehicles that are being delivered to           or from the point of storage to the point
 the purchaser.                                    of sale. Licensed Colorado wholesale
    Demo plates cannot be loaned to                auctions may use in-transit plates to
 charitable organizations for use in               transport vehicles consigned to them
 charitable activities or parades. Also,           either in state or out of state.
 they cannot be loaned or given to any                 In-transit plates may NOT be used
 athlete, coach, celebrity, accountant or          upon any vehicle being offered for sale
 lawyer other than for the purpose of a            and operated by a prospective retail
 test drive.                                       customer for demonstration purposes.
    Dealer demo plates cannot be                   An in-transit plated vehicle, which is
 displayed on vehicles that are used by            owned by a wholesaler or consigned to
 the dealership for any commercial                 an auction dealer, can be taken on a
 purpose. Such commercial vehicles shall           demonstration ride by the buying
 be titled and registered in the name of           dealer, but only if the wholesaler or
 the dealership. Commercial vehicles               auction representative is also present in
 shall include, but not be limited to:             the vehicle.
 delivery vehicles, tow vehicles, vehicles             In-transit plates CANNOT be used
 with signs advertising the dealership,            upon any vehicle:
 and service loaners.                              -Not owned by the dealer or wholesaler
    Lost or stolen plates shall be                     or consigned to the wholesale auto
 reported within two working days to the               auction.
 local law enforcement agency. After               -Used commercially within the
 obtaining a police blotter or case                    dealership.
 number, the dealer may obtain                     -That has been sold and is in the
 replacement plates at the dealer’s                    possession of the purchaser.
 county clerk’s office. A lost plate is            -Being used for private or personal use
 replaced at the full fee. A damaged                   by anyone, including the owner or
 dealer plate may be turned in to the                  employees of the dealership.
 county clerk’s office and replaced for the
 appropriate fee.                                      No restrictions exist on the number
    All plates must be surrendered                 of in-transit plates that can be
 immediately to the Department of                  purchased.
 Revenue, Auto Industry Division,
 whenever the dealer, through either a             Depot Plates
 voluntary or involuntary action, ceases              The use of a depot plate is limited to
 to be a new or used vehicle dealer. Any           transporting a vehicle to and from the
 plates not in the dealer’s possession             dealer’s place of business or storage to
 shall be reported as lost or stolen to the        the repair facility or for road testing the
 local law enforcement and then to the             vehicle after repair. All movement and
 Department of Revenue Auto Industry               road testing of a vehicle shall be done
 Division.                                         during normal business hours.
                                                   Movement of a vehicle using depot
 In-Transit Plates                                 plates during hours when the business
    In-transit plates may be used to               is not normally open shall constitute




October 2004                                  20
 private use. Under no circumstances can           all times when operated under the
 a depot plate be used for private                 permit.
 purposes.                                             It is not necessary to have a valid
     Any Colorado licensed dealer or any           driver’s license to purchase a vehicle.
 business doing work that involves                 However, any person driving the vehicle
 repairing, painting, upholstering,                from the dealer’s lot must have a valid
 polishing or similar work such as                 driver’s license.
 detailing, may apply for depot plates.                Temporary registration permits
 Depot plates are obtained by completing           feature a 3-part registration stub that
 the “Application For Depot Plates” (DR            must be completed by the dealer and
 2521) and submitting it to the Titles and         distributed as follows:
 Registration Section of the Motor Vehicle         1. the pink copy goes to the buyer with
 Business Group.                                       the permit
                                                   2. the white copy is mailed on the date
 Temporary Registration Permits                        of issuance to the Traffic Records
    Temporary registration permits are                 Section, Motor Vehicle Business
 purchased by licensed new and used                    Group, 1881 Pierce St., Lakewood,
 motor vehicle dealers, wholesalers and                CO 80214
 wholesale motor vehicle auctions from             3. the yellow copy must be retained by
 the county clerk in the county where the              the dealer.
 business is located. Temporary permits
 are only issued when the following sales             Temporary registration permits are
 are consummated: dealer to retail buyer           serially numbered and charged to the
 and dealer to dealer.                             purchasing dealer. Dealers shall not
    Temporary permits must bear the                loan, give, borrow, sell, exchange or
 date of expiration; that is, 60 days from         issue permits for or with another
 the date of issue in a dealer-to-consumer         dealer, individual, business, company
 sale. Temporary permits are issued for a          or corporation.
 maximum of 7 days in a dealer-to-dealer
 sale. If the expiration date falls on             Return Registration and Plates to
 Saturday, Sunday or a holiday, the                Customers
 expiration date is the first day                     Dealers and salespeople are
 thereafter. Dealers may issue only one            reminded that when they take a vehicle
 registration permit for each sold                 in on trade, they are to return the
 vehicle. In special circumstances, a              registration and plates to the customer.
 second permit may be obtained from the            The plates are the property of the
 county clerk in the buyer’s county of             owner and do not transfer with the
 residence.                                        vehicle. A customer registering a new
    Temporary permits can only be issued           vehicle may receive some credit for the
 to vehicles in safe operating condition.          old plate and registration. Not only will
 They are not to be issued to vehicles that        customers want credit for their old
 are sold as “tow away”, salvage vehicle or        plates, they may need the registration
 vehicles that are not roadworthy. Proof           as proof of ownership taxes paid for
 that the dealer has sold the vehicle to           their income tax records.
 the person whose name appears on the
 permit must be retained in the vehicle at




October 2004                                  21
                                                     Colorado a gross empty weight more
    Part VI: Related                                 than 10,000 lbs.)
                                                  -Motor vehicles that are not self-
  Federal & State Laws                               propelled (for example, trailers).
 Truth In Mileage Act
     Congress enacted the federal                 A Secure Power of Attorney Form
 odometer law in 1972 to prohibit                     The DR 2174 may be used in cases
 tampering with odometers and to                  where the original title has been lost or
 establish safeguards for the protection          the lien needs to be released on a
 of consumers. In 1986, the Truth in              trade-in by the seller. This document
 Mileage Act enhanced the paper trail of          permits the buying dealer to gain a
 odometer readings by requiring an                duplicate title without having to re-
 odometer disclosure upon each transfer           contact the original owner for a mileage
 of title of a motor vehicle. This also           affidavit.
 includes motor vehicle lessors and
 auctions. Records of vehicle transfers           Cash Reporting Rule
 and odometer statements must be                     The Federal Cash Reporting Rule
 retained for 5 years. This federal law           requires dealers to file Federal Form
 makes it unlawful for any person:                8300 with the Internal Revenue Service
 1. To advertise for sale, sell, use,             within 15 days of receiving more than
     install or have installed, any device        $10,000 cash in a single transaction.
     that causes an odometer to register          Cash is defined as anything other than
     an inaccurate mileage.                       a personal check. Dealers or
 2. To disconnect an odometer.                    salespersons who fail to file or structure
 3. To reset or alter the odometer of any         a deal to avoid filing Form 8300 can be
     motor vehicle with intent to change          found guilty of a federal felony and are
     the mileage.                                 subject to a fine of not less than
 4. To drive, with fraudulent intent, a           $25,000 and not more than $100,000 for
     motor vehicle with a disconnected or         each violation.
     dysfunctional odometer.
 5. To conspire with any other person to          Canceling A Contract Within 72 Hours
     violate the provisions of the Act.               Many buyers mistakenly believe that
 6. To fail to issue a disclosure                 a motor vehicle sales contract can be
     statement or to issue a false                automatically canceled within 72 hours
     statement.                                   of signing the contract. This is only true
                                                  of a consumer credit sale made through
    A dealer or distributor must retain           door to door sales. It does not apply to
 the incoming and outgoing mileage                sales at a dealership having a fixed
 disclosures for 5 years.                         permanent location and vehicles
                                                  exhibited on a continuing basis. In
    The following types of motor vehicles         Colorado, signing of the contract is, in
 are exempt from the Truth in Mileage             and of itself, binding.
 Act:
 -Motor vehicles 10 years old and older           “As Is” and “Tow Away”
 -Motor vehicles having a gross empty                Under the Uniform Commercial
    weight more than 16,000 lbs. (In              Code, an implied warranty occurs in




October 2004                                 22
  every contract for the sale of a motor               as advertised.
  vehicle unless the warranty is properly           3. Making false or misleading
  excluded. A seller can create an express             statements of fact concerning the
  warranty by a promise, affirmation,                  price of goods, services, or property
  sample or description of the goods which             or the reasons for, existence of, or
  is made part of the basis of the bargain.            amounts of price reductions.
      Dealers exclude all implied                   4. Failing to deliver to the customer at
  warranties by including in the sales                 the time of an installment sale, a
  contract plain language such as “as-is”,             written contract setting forth all the
  which alerts the buyer that dealer                   terms and conditions of the sale.
  warranties, express or implied, have                 (See Financing Section for
  been excluded.                                       additional comments.)
      The term “as-is” should not be                5. Failing to disclose material
  confused with the term “tow away.” “Tow              information concerning goods,
  away” is a very specific term reserved for           services, or property when such
  motor vehicles that cannot pass state                information was known at the time
  safety standards. Such vehicles must be              of an advertisement or sale, if
  sold as “tow away.” Dealers cannot                   failure to disclose such information
  issue temporary permits for “tow away”               was intended to induce the
  vehicles or allow them to be driven off              customer to enter into a
  the dealership’s premises. Moreover,                 transaction. This could include
  dealers must indicate on the buyer’s                 failing to disclose material
  order the extent of the vehicle’s safety             information about body or hail
  problems to bring them to the attention              damage, engine condition, etc.
  of the certified law enforcement VIN                 Dismissing any failure to disclose or
  inspector in subsequent road worthiness              covering up any material
  inspections.                                         information as simply an industry
                                                       practice of “puffing” (unwarranted
  Deceptive Trade Practices                            praise) is a questionable defense
      While dealers, wholesalers and                   against a deceptive trade practice
  salespersons should be familiar with the             charge.
  entire Consumer Protection Act, several           6. Failing, in connection with any
  sections of that Act are especially                  solicitation, to clearly and
  relevant to the motor vehicle industry.              prominently disclose immediately
  First and foremost among the deceptive               adjacent to the description of any
  trade practices is “bait and switch,”                item or prize received by any person
  which is discussed in detail in Part IV.             the actual retail value of each item
  In addition to bait and switch, the                  or prize to be awarded. The actual
  following deceptive practices are also               retail value is the price at which
  worth relating:                                      substantial sales of the item were
  1. Representing goods as original or new             made in the trade area within the
      when it is known, or should be                   last 90 days, or if no substantial
      known, that they are deteriorated,               sales were made, the actual cost of
      altered, reconditioned, reclaimed,               the item or prize. Whenever the
      used, or secondhand.                             actual cost is less than fifteen
  2. Advertising goods, services, or                   dollars per item, a disclosure that
      property with intent not to sell them            “actual cost to the provider is less




October 2004                                   23
   than $15.00” must be provided.                   by the Federal Reserve Board’s
7. Refusing or failing to obtain all                Regulation M. The disclosures are to be
   government licenses or permits (see              given to the buyer or lessee at the time
   discussion on unlicensed dealers at              the sale or lease is completed.
   end of this section).                                Board regulations require dealers,
8. Failing, in connection with the                  wholesalers and auction dealers to
   issuing, making, providing, selling, or          disclose on the contract form when a
   offering to sell a motor vehicle                 motor vehicle is known by the dealer,
   service contract, to comply with the             wholesaler or auction dealer to be a
   provisions of 42-11-101 C.R.S.                   salvage vehicle. This requirement can
9. Guaranteeing to a purchaser of a                 be satisfied by using a “Rebuilt From
   motor vehicle who conditions such                Salvage Disclosure” affidavit (DR 2710).
   purchase on the approval of a                    Disclosure must also be made when it
   consumer credit sale or consumer                 is known that a vehicle is to have
   loan that such purchaser has been                sustained material damage at any one
   approved for a loan if such approval is          time from any one incident.
   not final.
10.Accepting a trade-in on the purchase             Emissions
   of a motor vehicle and selling the                   Ten Colorado counties make up the
   trade-in before the purchaser has                Automobile Inspection and Re-
   been approved for a consumer loan if             adjustment (AIR) Program area in
   such approval is a condition of the              Colorado: Adams, Arapahoe, Boulder,
   sale.                                            Denver, Douglas, El Paso, Jefferson,
11.Failing to return to the purchaser               Larimer, Broomfield and Weld.
   any down payment or collateral                       Vehicles will not require an
   tendered dependent upon approval of              emissions test on change of ownership
   financing as part of a consumer                  if they meet the following criteria:
   credit sale if such financing is not                 1. Vehicle was registered for the
   approved.                                        first time with an MSO in a Colorado
12.Failing to disclose in writing, prior to         Emissions County and received a four-
   the sale, to the purchaser that a                year emissions exemption. The
   motor vehicle is a salvage vehicle.              exemption is based on model year and
                                                    begins when the vehicle is purchased
   Any person who has engaged in a                  for the first time and expires when the
deceptive trade practice is liable for 3            vehicle reaches the anniversary of its
times the amount of the actual damages              fourth model year.
sustained or $500, whichever is greater,                2. The last registration record in the
as well as court costs and legal fees.              County Clerks office shows at least 12
                                                    months remaining on the four-year
Disclosures Required                                exemption at the time of sale.
    Part of the contract for the retail sale            3. The vehicle can be sold multiple
or lease of a motor vehicle, other than a           times as long as number 1 above
retail installment sales contract subject           applies.
to the Uniform Commercial Credit Code,                  VEHICLES THAT WILL NEED AN
must include either the Disclosures                 EMISSIONS TEST
Required As Part of a Motor Vehicle                     Late model vehicles sold to
Sales Contract or disclosures required              consumers who will register the vehicle




October 2004                                   24
in a Colorado Emissions County that are          for the timely titling and registration of
less than four model years old that will         the vehicle, and must be appropriate to
require an emissions test include those          the emission failure.
vehicles that:                                       Dealers located within the AIR
    1. Were re-sold and were tested              program area selling a vehicle that will
under the old law.                               be registered outside the AIR program
    2. Vehicles that have passed a               area are not required to test the
voluntary emissions inspection for any           vehicle’s emissions or issue a CEC.
reason.                                          However, it is the dealer’s
    3. Vehicles that were titled and             responsibility to verify that the vehicle
registered in another state.                     will be registered outside the AIR
    4. Vehicles that do not have a               program counties.
registration record showing at least 12              The selling dealer is responsible for
months of exemption from the original            the vehicle passing the emissions
four-year exemption.                             inspection even if a third party issued
    Additionally, the 120-day rule has           the passing CEC. Complaints about
been repealed.                                   vehicles failing emission tests can be
    Under the new law dealers may sell           made against the selling dealer. In
a used vehicle 1982 and newer, but the           turn, once the complaint against the
dealer must provide the purchaser with           dealer has been resolved, the dealer
proof of a Certificate of Emissions              has the right to file a complaint against
Control, (CEC), that is no more than 12          the inspection station performing an
months old from the date of test to the          invalid inspection.
date of sale. Under the new law dealers              A vehicle that qualifies as
may sell a used vehicle 1981 and older,          “inoperable” or cannot otherwise be
but the dealer must provide the                  tested under Colorado regulations does
purchaser with proof of a Certificate of         not need to be emissions tested. When
Emissions Control, (CEC), that is no             a vehicle is not required to comply with
more than 9 months old from the date of          emission testing, the seller must
test to the date of sale.                        provide the purchaser, prior to the
    The voucher law is still in affect.          completion of the sale, a written notice
    All dealers selling any vehicle that         on a form prescribed by the Department
will be registered inside the AIR program        of Revenue, (DR2023), that clearly
area must furnish a valid Certificate of         explains:
Emissions Compliance (CEC), as                   -The vehicle does not currently comply
required for that county for the vehicle             with the emissions requirements.
at the time of sale. Vouchers can be             -The seller does not warrant that the
used for vehicles being registered in the            vehicle will comply with the
enhanced 7 county area but not in the                emissions requirements.
other emission tested areas. The sale of         -The purchaser is responsible for
the vehicle is contingent upon the                   complying with the emissions
vehicle passing the emission test. If the            requirements prior to registering
vehicle fails the test, the dealer is                the vehicle.
required to effect the necessary repairs         -The reasons why the vehicle is
so that the vehicle does pass. Otherwise,            inoperable or otherwise cannot be
the dealer is to unwind or undo the deal.            tested.
Repairs must be done promptly to allow               The seller cannot issue a temporary




October 2004                                25
registration permit if the vehicle has not            Finance deals are those in which
passed the emissions testing.                      the dealer arranges financing for the
    New diesel vehicles required to have           customer or carries the loan him or
proof of emissions exemption, shall be             herself if more than 4 payments are
issued an exemption when verified by               involved after the down payment or if
the county clerk. Prior to the expiration          any interest is charged. Such deals are
of such exemption, such vehicle shall be           not binding until a complete, final
inspected and a certification of                   disclosure is given in writing and
emissions control shall be obtained for            accepted by the customer.
diesel smoke opacity compliance. Such
certificate shall expire on the earliest to        Colorado Lemon Law
occur of the following:                                The Lemon Law covers only NEW
    (A) The anniversary of the day of the          self-propelled vehicles, including
issuance of such certification when                pickups and vans. Motor homes and
such vehicle has reached its second                motorcycles are excluded from the
model year if it is a light-duty diesel            Lemon Law.
vehicle (14,000 lbs. or less).                         If a new vehicle has a defect that
    (B) The anniversary of the day of the          substantially impairs its use and
issuance of such certification when                market value within one year following
such vehicle has reached its fourth                purchase, and the defect is not repaired
model year if it is a heavy-duty vehicle           after a “reasonable number of
(14,001 lbs or more).                              attempts,” a court may order the
    (C) On the date of the transfer of             manufacturer to replace the vehicle or
ownership if such date is within twelve            refund the purchase price less a
months before such certification would             reasonable allowance for use of the
expire, unless such transfer of                    vehicle.
ownership is a transfer from the lessor                Under law, a “reasonable number of
to the lessee.                                     attempts” to repair applies when the
      To obtain more information                   same defect exists after it has been
regarding emissions, please call (303)             subject to repair four or more times
205-5603.                                          within the first year after the date of
                                                   original delivery. It also applies when
Financing Approval                                 the vehicle is out of service for repairs
    Dealers must not sell a customer’s             for a cumulative total of 30 or more
trade-in until the deal involving the              business days during the warranty term
trade-in is final. If, for any reason, the         or one year after purchase, whichever
dealer-arranged financing falls through            comes first.
or the customer refuses to sign the                    Defects, such as rattles or squeaks,
finance contract because the agreed                which do not substantially impair the
upon terms cannot be arranged, the                 use and market value of the vehicle are
deal is not binding and the customer is            not covered. Also, defects that result
entitled to have the trade-in returned.            from abuse, neglect or unauthorized
Any sale of the trade-in vehicle prior to          modifications or alterations of the
the approved financing at the agreed               vehicle by a consumer are not covered.
upon terms would be considered an                      Prior to suing a manufacturer for a
illegal act.                                       refund or a replacement vehicle, the
                                                   consumer must first send a written




October 2004                                  26
notice of defect by certified mail to the          has 20 days in which to cure the
manufacturer giving them a chance to               default. The creditor cannot accelerate
repair it and go through the                       the maturity of the unpaid balance or
manufacturer’s consumer arbitration                repossess during this period. If the
program, if one exists.                            debtor cures the default within 20
                                                   days, the debtor’s rights are restored
Motor Vehicle Repair Act                           under the agreement as though no
   This law deals with the issues of               default had occurred. If the debtor does
consumers and motor vehicle repair. Most           not respond, the creditor may then
retail dealers that perform repairs are            move to repossess. Only one right to
subject to this Act. Only repairs promised         cure notice is required in a 12-month
as part of the sale of a motor vehicle fall        period.
under the jurisdiction of the Auto                    Local law enforcement agencies
Industry Division. Filing a complaint              must be notified within one hour before
when repairs are not associated with the           or after the repossession occurs.
sale of a vehicle is done at the District          Dealers should ensure that their
Attorney’s office in the county in which           repossessors are bonded through the
the repairs were made.                             State Attorney General’s office.
                                                   Employing an unbonded repossessor
Repossession                                       may make the dealer liable for the
    The complex laws concerning                    actions of the repossessor.
repossession apply to both vehicle sales
and leases. A creditor does not                    Sunday Closing Law
automatically have the right to repossess             No dealer or employee shall keep
a vehicle upon default by a consumer in a          open or operate, or assist in keeping
credit transaction.                                open or operating, any premise, open or
    The creditor shall create a security           closed, for the purpose of selling,
interest in the motor vehicle by filing a          bartering or exchanging or offering for
lien on the vehicle in the county where            sale, barter, or exchange any motor
the debtor resides. Ten days after a               vehicle, whether new, used or
debtor has failed to make the required             secondhand, on the first day of the
payment, he or she is considered to be in          week commonly known as Sunday. This
default. The creditor is required by law to        law does not apply to the following:
give the debtor a written right to cure            -The opening of an establishment or
notice, which can either be delivered or              place of business for other purposes,
mailed to the debtor’s residence. Sending             such as the sale of petroleum
the right to cure notice by regular mail              products, tires, automobile
and obtaining a certificate of mailing from           accessories, or
the post office is recommended in order            -For the purpose of operating and
to document the date it was sent.                     conducting a motor vehicle repair
    The right to cure notice must state               shop, or
the name, address and telephone number             -For the purpose of supplying such
of the creditor, a brief description of the           services as towing or wrecking.
credit transaction, the debtor’s right to           The selling of boat trailers and
cure the default, the amount of payment            snowmobile trailers is exempt from the
and the date by which the payment must             Sunday closing law. These are the
be made to cure the default. The debtor




October 2004                                  27
 ONLY motor vehicle sales exempt from
 the Sunday closing requirements.

 Unlicensed Dealer or Salesperson
     It is unlawful for any person to act
 as a new or used vehicle dealer,
 wholesaler, motor vehicle auction
 dealer, or salesperson unless that
 person has been licensed as such.
     Any person who willfully violates this
 law commits a class 3 misdemeanor,
 and upon conviction, shall be punished
 by a fine of up to $1,000 for each vehicle
 sold; except that, if the violator is a
 corporation shall be punished by a fine
 of up to $2,500 for each vehicle sold. A
 second conviction shall be punished by
 a fine of $2,500. The Consumer
 Protection Act also states that failure to
 obtain all government licenses, or
 permits required to perform the
 services or to sell the property, is a
 deceptive trade practice.




 __________________________________

     The information presented is
 intended to be used as a guide. While
 every effort has been made to make the
 information in this manual accurate
 and helpful , it is not intended to be a
 substitute for the statutes and
 regulations or other legal documents.




October 2004                                  28

								
To top