When it comes to dealer agreements with finance companies and bond companies, there are clauses that can significantly increase your liability as a dealership. It is crucial to understand these clauses before signing any agreements with finance companies or bond companies to protect yourself and your business.

One common clause found in dealer agreements with finance companies is the first payment recourse. This clause allows the finance company to require the dealership to buy back the contract if the customer/buyer fails to make the first payment on the loan. This means that the dealer would be responsible for carrying the loan in house. This can be a significant financial burden for the dealer and could potentially put them out of business.

Another clause that can increase liability is the personal guarantee clause. This clause requires the dealer to personally guarantee that if a customer sues the dealership and finance company/bond company, the personal guarantor could be financially responsible for any damages, costs, and/or attorneys fees incurred by the finance/bond company in the lawsuit. This clause can put the dealer's personal assets, such as their home or personal savings, at risk.

Finally, indemnification requirements are another clause that can increase liability. This clause requires the dealer to indemnify the finance/bond company against any losses, damages, or legal fees incurred as a result of the dealer's actions or omissions. This means that the dealer would be responsible for reimbursing the finance company for any losses or damages (including attorneys fees/costs) they incur due to the dealer's alleged misconduct.

It is important to note that when signing a bond agreement with a bond company or a dealer agreement with a lender, the dealer is also signing a personal guarantee. This means that even if the dealership goes out of business or closes down its corporation/LLC, the dealer could still be personally liable through their agreements with the bond and finance companies.

Unfortunately, some finance/bond companies may not be willing to change the language of these clauses even if the dealer requests it. It is crucial to read all agreements thoroughly and consult with a lawyer if necessary to ensure that you fully understand the implications of the clauses and their potential impact on your business and personal finances.

In conclusion, dealer agreements with finance/bond companies can have clauses that increase liability for the dealer. It is crucial to understand these clauses before signing any agreements and to consult with a lawyer if necessary. By being aware of these clauses, dealers can plan accordingly and protect themselves and their businesses from potential financial burdens.