GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2025
H 1
HOUSE BILL 406
Short Title: Clarify Motor Vehicle Dealer Laws. (Public)
Sponsors: Representatives B. Jones, Tyson, and Ross (Primary Sponsors).
For a complete list of sponsors, refer to the North Carolina General Assembly web site.
Referred to: Transportation, if favorable, Rules, Calendar, and Operations of the House
March 17, 2025
*H406 -v-1*
A BILL TO BE ENTITLED 1
AN ACT TO CLARIFY VARIOUS MOTOR VEHICLE DEALER LAWS. 2
The General Assembly of North Carolina enacts: 3
4
PREVENT UNFAIR DEALER FRANCHISE TERMINATIONS AND CLARIFY RV 5
DEALER TERMINATION ASSISTANCE RIGHTS 6
SECTION 1. G.S. 20-305 reads as rewritten: 7
"§ 20-305. Coercing dealer to accept commodities not ordered; threatening to cancel 8
franchise; preventing transfer of ownership; granting additional franchises; 9
terminating franchises without good cause; preventing family succession. 10
It shall be unlawful for any manufacturer, factory branch, distributor, or distributor branch, 11
or any field representative, officer, agent, or any representative whatsoever of any of them: 12
… 13
(4) Notwithstanding the terms of any franchise agreement, to prevent or refuse to 14
approve the sale or transfer of the ownership of a dealership by the sale of the 15
business, stock transfer, or otherwise, or the transfer, sale or assignment of a 16
dealer franchise, or a change in the executive management or principal 17
operator of the dealership, change in use of an existing facility to provide for 18
the sales or service of one or more additional line-makes of new motor 19
vehicles, or relocation of the dealership to another site within the dealership's 20
relevant market area, if the Commissioner has determined, if requested in 21
writing by the dealer within 30 days after receipt of an objection to the 22
proposed transfer, sale, assignment, relocation, or change, and after a hearing 23
on the matter, that the failure to permit or honor the transfer, sale, assignment, 24
relocation, or change is unreasonable under the circumstances. The following 25
applies: 26
… 27
i. It is unlawful for a manufacturer to, in any way, do any of the 28
following: 29
1. Condition its approval of a proposed transfer, sale, assignment, 30
change in the dealer's executive management, principal 31
operator, or appointment of a designated successor, on the 32
existing or proposed dealer's willingness to construct a new 33
facility, renovate the existing facility, acquire or refrain from 34
acquiring one or more line-makes of vehicles, separate or 35 General Assembly Of North Carolina Session 2025
Page 2 House Bill 406-First Edition
divest one or more line-makes of vehicle, or establish or 1
maintain exclusive facilities, personnel, or display space. 2
… 3
4. Condition, directly or indirectly, the approval of the sale or 4
transfer of the ownership of a dealership by the sale of the 5
business, stock transfer, or otherwise, or the transfer, sale, 6
succession, or assignment of a dealer's franchise, or a change 7
in the executive management or principal operator of the 8
dealership, or a dealer's proposed relocation of the dealership 9
facility, or a dealer's satisfaction of the terms of any incentive 10
program or contest, upon the existing or proposed dealer's 11
willingness to enter into a right of first refusal in favor of the 12
manufacturer. 13
5. In determining whether to approve a dealer's proposed transfer, 14
sale, assignment, change in the dealer's executive management, 15
principal operator, or appointment of a designated successor, 16
to inquire about or consider whether another manufacturer or 17
distributor had previously denied, rejected, or otherwise turned 18
down the application of the applicant, or any person or entity 19
affiliated with the applicant, to acquire a franchise or 20
dealership or become principal operator, part of the executive 21
management, or a successor owner or manager of a dealership. 22
6. In determining whether to approve a dealer's proposed transfer, 23
sale, assignment, change in the dealer's executive management, 24
principal operator, or appointment of a designated successor, 25
to inquire about or consider whether the applicant, or any 26
person or entity affiliated with the applicant, had, for any 27
reason, ever previously commenced a civil or administrative 28
proceeding against any manufacturer or distributor. 29
j. If a manufacturer or distributor objects to, denies, rejects, or otherwise 30
turns down a dealer's proposed transfer, sale, assignment, change in 31
the dealer's executive management, principal operator, or appointment 32
of a designated successor, the manufacturer or distributor shall 33
reimburse both the dealer and applicant for their respective attorneys' 34
fees, if either of the following is applicable: 35
1. Both the dealer and applicant elect not to appeal from or 36
otherwise seek civil or administrative redress from the decision 37
of the manufacturer to object to, deny, reject, or otherwise turn 38
down the dealer's application. 39
2. The decision of the manufacturer or distributor to object to, 40
deny, reject, or otherwise turn down the dealer's application is 41
ultimately overturned by a reviewing court or administrative 42
agency. 43
… 44
(6) Notwithstanding the terms, provisions or conditions of any franchise or 45
notwithstanding the terms or provisions of any waiver, to terminate, cancel or 46
fail to renew any franchise with a licensed new motor vehicle dealer unless 47
the manufacturer has satisfied the notice requirements of sub-subdivision c. 48
of this subdivision and the Commissioner has determined, if requested in 49
writing by the dealer within (i) the time period specified in 50
G.S. 20-305(6)c.1.II., III., or IV., as applicable, or (ii) the effective date of the 51 General Assembly Of North Carolina Session 2025
House Bill 406-First Edition Page 3
franchise termination specified or proposed by the manufacturer in the notice 1
of termination, whichever period of time is longer, and after a hearing on the 2
matter, that there is good cause for the termination, cancellation, or 3
nonrenewal of the franchise and that the manufacturer has acted in good faith 4
as defined in this act regarding the termination, cancellation or nonrenewal. 5
When such a petition is made to the Commissioner by a dealer for 6
determination as to the existence of good cause and good faith for the 7
termination, cancellation or nonrenewal of a franchise, the Commissioner 8
shall promptly inform the manufacturer that a timely petition has been filed, 9
and the franchise in question shall continue in effect pending the 10
Commissioner's decision. The Commissioner shall try to conduct the hearing 11
and render a final determination within 180 days after a petition has been filed. 12
If the termination, cancellation or nonrenewal is pursuant to 13
G.S. 20-305(6)c.1.III. then the Commissioner shall give the proceeding 14
priority consideration and shall try to render his final determination no later 15
than 90 days after the petition has been filed. Any parties to a hearing by the 16
Commissioner under this section shall have a right of review of the decision 17
in a court of competent jurisdiction pursuant to Chapter 150B of the General 18
Statutes. Any determination of the Commissioner under this section finding 19
that good cause exists for the nonrenewal, cancellation, or termination of any 20
franchise shall automatically be stayed during any period that the affected 21
dealer shall have the right to judicial review or appeal of the determination 22
before the superior court or any other appellate court and during the pendency 23
of any appeal; provided, however, that within 30 days of entry of the 24
Commissioner's order, the affected dealer provide such security as the 25
reviewing court, in its discretion, may deem appropriate for payment of such 26
costs and damages as may be incurred or sustained by the manufacturer by 27
reason of and during the pendency of the stay. Although the right of the 28
affected dealer to such stay is automatic, the procedure for providing such 29
security and for the award of damages, if any, to the manufacturer upon 30
dissolution of the stay shall be in accordance with G.S. 1A-1, Rule 65(d) and 31
(e). No such security provided by or on behalf of any affected dealer shall be 32
forfeited or damages awarded against a dealer who obtains a stay under this 33
subdivision in the event the ownership of the affected dealership is 34
subsequently transferred, sold, or assigned to a third party in accordance with 35
this subdivision or subdivision (4) of this section and the closing on such 36
transfer, sale, or assignment occurs no later than 180 days after the date of 37
entry of the Commissioner's order. Furthermore, unless and until the 38
termination, cancellation, or nonrenewal of a dealer's franchise shall finally 39
become effective, in light of any stay or any order of the Commissioner 40
determining that good cause exists for the termination, cancellation, or 41
nonrenewal of a dealer's franchise as provided in this subdivision, a dealer 42
who receives a notice of termination, cancellation, or nonrenewal from a 43
manufacturer as provided in this subdivision shall continue to have the same 44
rights to assign, sell, or transfer the franchise to a third party under the 45
franchise and as permitted under G.S. 20-305(4) as if notice of the termination 46
had not been given by the manufacturer. Any franchise under notice or threat 47
of termination, cancellation, or nonrenewal by the manufacturer which is duly 48
transferred in accordance with G.S. 20-305(4) shall not be subject to 49
termination by reason of failure of performance or breaches of the franchise 50
on the part of the transferor. 51 General Assembly Of North Carolina Session 2025
Page 4 House Bill 406-First Edition
a. Notwithstanding the terms, provisions or conditions of any franchise 1
or the terms or provisions of any waiver, good cause shall exist for the 2
purposes of a termination, cancellation or nonrenewal when: 3
… 4
2. If the failure by the new motor vehicle dealer relates to the 5
performance of the new motor vehicle dealer in sales or 6
service, then good cause shall be defined as the failure of the 7
new motor vehicle dealer to comply with reasonable 8
performance criteria established by the manufacturer if the new 9
motor vehicle dealer was apprised by the manufacturer in 10
writing of the failure; and 11
… 12
II. The new motor vehicle dealer was afforded a 13
reasonable opportunity, for a period of not less than 180 14
days, to comply with the criteria; and 15
III. The new motor vehicle dealer failed to demonstrate 16
substantial progress towards compliance with the 17
manufacturer's performance criteria during such period 18
and the new motor vehicle dealer's failure was not 19
primarily due to economic or market factors within the 20
dealer's relevant market area which were beyond the 21
dealer's control.control; and 22
IV. During the entire performance review period 23
established by the manufacturer, the manufacturer 24
made available to the dealer a sufficient number and 25
model mix of new motor vehicles for the dealer to 26
achieve all elements of the manufacturer's performance 27
criteria. 28
… 29
d. Payments. 30
1. Notwithstanding the terms of any franchise, agreement, or 31
waiver, upon the termination, nonrenewal or cancellation of 32
any franchise by the manufacturer or distributor, the cessation 33
of business or the termination, nonrenewal, or cancellation of 34
any franchise by any new motor vehicle dealer located in this 35
State, or upon any of the occurrences set forth in 36
G.S. 20-305(6)c.1.IV., the manufacturer or distributor shall 37
purchase from and compensate the new motor vehicle dealer 38
for all of the following: 39
I. Each new and unsold motor vehicle vehicle, and each 40
motorized or nonmotorized trailer, including, but not 41
limited to, travel trailers, slide-in truck campers, and 42
park models, within the new motor vehicle dealer's 43
inventory that has been acquired within 24 months of 44
the effective date of the termination from the 45
manufacturer or distributor or another same line-make 46
dealer in the ordinary course of business, and which has 47
not been substantially altered or damaged to the 48
prejudice of the manufacturer or distributor while in the 49
new motor vehicle dealer's possession, and which has 50
been driven less than 1,000 miles or, for purposes of a 51 General Assembly Of North Carolina Session 2025
House Bill 406-First Edition Page 5
recreational vehicle motor home as defined in 1
G.S. 20-4.01(32b)c., less than 1,500 2,500 miles 2
following the original date of delivery to the dealer, and 3
for which no certificate of title has been issued. For 4
purposes of this sub-subdivision, the term "ordinary 5
course of business" shall include inventory transfers of 6
all new, same line-make vehicles between affiliated 7
dealerships, or otherwise between dealerships having 8
common or interrelated ownership, provided that the 9
transfer is not intended solely for the purpose of 10
benefiting from the termination assistance described in 11
this sub-subdivision. 12
… 13
f. The provisions of sub-subdivision e. above shall not be applicable 14
when the termination, nonrenewal, or cancellation of the franchise 15
agreement by a new motor vehicle dealer is the result of the sale of 16
assets or stock of the motor vehicle dealership. The provisions of 17
sub-subdivisions d. and e. above shall not be applicable when the 18
termination, nonrenewal, or cancellation of the franchise agreement is 19
at the initiation of a new motor vehicle dealer of recreational vehicle 20
motor homes, as defined in G.S. 20-4.01(32b)c., provided that at the 21
time of the termination, nonrenewal, or cancellation, the recreational 22
vehicle manufacturer or distributor has paid to the dealer all claims for 23
warranty or recall work, including payments for labor, parts, and other 24
expenses, which were submitted by the dealer 30 days or more prior 25
to the date of termination, nonrenewal, or cancellation. 26
…." 27
28
DEALER COMPENSATION FOR THE SALE OF OVER -THE-AIR PRODUCTS AND 29
SERVICES 30
SECTION 2. G.S. 20-305(57) reads as rewritten: 31
"(57) To sell, or activate for a fee, any permanent or temporary motor vehicle 32
accessory, option, add-on, service, feature, improvement, or upgrade on or to 33
any motor vehicle owned or leased by a retail customer located in this State, 34
through over-the-air or remote means, unless the manufacturer or distributor 35
complies with all of the following requirements: 36
… 37
c. If the sale or activation of the permanent or temporary motor vehicle 38
accessory, option, add-on, service, upgrade, feature, or improvement 39
by either the manufacturer or the direct involvement of the dealer who 40
sells or leases the vehicle to the retail customer occurs at the time of 41
the new motor vehicle sale or lease, or within the 12-month period 42
immediately following the sale or lease of the new motor vehicle by a 43
North Carolina franchised motor vehicle dealer, the manufacturer or 44
distributor provides the franchised motor vehicle dealer that sold the 45
new motor vehicle reasonable compensation in an amount not less than 46
twenty percent (20%) of the gross compensation that was collected 47
from the customer for the sale or activation of the accessory, option, 48
add-on, service, upgrade, feature, or improvement to the original North 49
Carolina vehicle owner or lessee when the cost of which would equal 50
or exceed (i) fifty dollars ($50.00), if the cost or purchase price to the 51 General Assembly Of North Carolina Session 2025
Page 6 House Bill 406-First Edition
retail customer involves a single, one-time payment, or (ii) 1
seventy-five dollars ($75.00) in cumulative cost or purchase price over 2
any 12-month period, if the retail customer is making multiple or 3
periodic payments. 4
d. If the sale or activation of the permanent or temporary motor vehicle 5
accessory, option, add-on, service, upgrade, feature, or improvement 6
did not occur as provided in sub-subdivision c. of this subdivision, and 7
a North Carolina franchised new motor vehicle dealer of the 8
manufacturer or distributor was directly involved in the sale of the 9
feature or improvement, the manufacturer or distributor provides 10
reasonable compensation in an amount not less than twenty percent 11
(20%) of the gross compensation that was collected from the customer 12
to the North Carolina franchised new motor vehicle dealer that sold 13
the accessory, option, add-on, service, upgrade, feature, or 14
improvement to a North Carolina resident when the cost of which 15
would equal or exceed (i) fifty dollars ($50.00), if the cost or purchase 16
price to the retail customer involves a single, one-time payment, or (ii) 17
seventy-five dollars ($75.00) in cumulative cost or purchase price over 18
any 12-month period, if the retail customer is making multiple or 19
periodic payments. 20
… 21
f. When providing a new motor vehicle to a dealer for offer or sale to the 22
public, the manufacturer or distributor shall provide to the dealer a 23
written disclosure that may be furnished by the dealer to a potential 24
purchaser or lessee of the new motor vehicle identifying each 25
permanent or temporary motor vehicle accessory, option, add-on, 26
service, upgrade, feature, or improvement of the vehicle that may be 27
initiated, updated, changed, or maintained by the manufacturer or 28
distributor through over-the-air or remote means, the cost to the retail 29
customer at the time of the new motor vehicle sale or lease, and the 30
fact that all such accessories, options, add-ons, services, upgrades, 31
features, or improvements may be purchased directly from the dealer. 32
Every manufacturer or distributor that, through over-the-air or remote 33
means, provides any permanent or temporary motor vehicle accessory, 34
option, add-on, service, feature, improvement, or upgrade on or to any 35
motor vehicle owned or leased by a retail customer located in this State 36
shall provide to each of its franchised dealers within this State, on a 37
basis no less frequently than monthly, a statement itemizing the type, 38
volume, and gross receipts generated from the sales of over-the-air or 39
remotely activated products and services that were sold to the dealer's 40
customers and calculating the fees and commissions to which the 41
dealer is entitled pursuant to this sub-subdivision. A manufacturer or 42
distributor may comply with this sub-subdivision by notifying the 43
dealer that such information is available on a website or by other 44
digital means." 45
46
FACILITATE DEALER TRANSFER OF OWNERSHIP TO QUALIFIED BUYERS 47
SECTION 3. G.S. 20-305(4) reads as rewritten: 48
"(4) Notwithstanding the terms of any franchise agreement, to prevent or refuse to 49
approve the sale or transfer of the ownership of a dealership by the sale of the 50
business, stock transfer, or otherwise, or the transfer, sale or assignment of a 51 General Assembly Of North Carolina Session 2025
House Bill 406-First Edition Page 7
dealer franchise, or a change in the executive management or principal 1
operator of the dealership, change in use of an existing facility to provide for 2
the sales or service of one or more additional line-makes of new motor 3
vehicles, or relocation of the dealership to another site within the dealership's 4
relevant market area, if the Commissioner has determined, if requested in 5
writing by the dealer within 30 days after receipt of an objection to the 6
proposed transfer, sale, assignment, relocation, or change, and after a hearing 7
on the matter, that the failure to permit or honor the transfer, sale, assignment, 8
relocation, or change is unreasonable under the circumstances. The following 9
applies: 10
… 11
e. With respect to a proposed change in the executive management or 12
principal operator of the dealership, the sole issue for determination 13
by the Commissioner and the sole issue on which the Commissioner 14
shall hear or consider evidence shall be whether, by reason of lack of 15
training, lack of prior experience, poor past performance, or poor 16
character, the proposed candidate for a position within the executive 17
management or as principal operator of the dealership is unfit for the 18
position. For purposes of this subdivision, the refusal by the 19
manufacturer to accept a proposed candidate for executive 20
management or as principal operator who is of good moral character 21
and who otherwise meets the written, reasonable, and uniformly 22
applied standards or qualifications, if any, of the manufacturer relating 23
to the business experience and prior performance of executive 24
management required by the manufacturers of its dealers is presumed 25
to demonstrate the manufacturer's failure to prove the proposed 26
candidate for executive management or as principal operator is unfit 27
to serve the capacity. If the manufacturer is in any part basing its 28
decision to object to the proposed change in the executive management 29
or principal operator of the dealership on the candidate's alleged poor 30
past performance, the manufacturer shall have the burden of proving 31
that, during the immediately preceding three calendar-year period, the 32
average overall sales performance or average overall customer 33
satisfaction performance of all of the dealerships owned or operated 34
by the candidate, when considering all line-makes of new motor 35
vehicles sold by the franchised dealerships owned or operated by the 36
candidate, was below the national average as measured by each such 37
line-make. In its notice of objection, the manufacturer is required to 38
cite and provide the specific data and calculations upon which the 39
manufacturer bases its contention that during the immediately 40
preceding three calendar-year period, the candidate's overall sales 41
performance or average overall customer satisfaction performance of 42
all of the dealerships owned or operated by the candidate, when 43
considering all line-makes of new motor vehicles sold by the 44
franchised dealerships owned or operated by the candidate, was below 45
the national average as measured by each such line-make. For 46
purposes of this subdivision, the sales performance or customer 47
satisfaction performance of a dealership that has been owned by the 48
candidate for less than two years prior to the date the existing dealer 49
notified the manufacturer or distributor of the proposed change in the 50
executive management or principal operator of the dealership may not 51 General Assembly Of North Carolina Session 2025
Page 8 House Bill 406-First Edition
be used in whole or in part as a basis for rejecting the candidate's 1
application. 2
…." 3
4
CLARIFY DEFINITION OF MOTOR VEHICLE DEALER 5
SECTION 4. G.S. 20-286(11) reads as rewritten: 6
"(11) Motor vehicle dealer or dealer. – 7
a. A person who does any of the following: 8
… 9
6. For commission, money, or other thing of value, or on behalf 10
of another person sharing ten percent (10%) or more common 11
ownership, offers new vehicles as part of a subscription 12
program. This sub-sub-subdivision shall not apply to any 13
person providing a vehicle subscription or monthly rental 14
program on or after January 1, 2025. 15
7. Performs any warranty service or recall work on motor 16
vehicles; provided, however, that this sub-sub-subdivision 17
shall not be applicable with respect to a commercial fleet 18
customer that has a designation as such by the manufacturer or 19
distributor. 20
…." 21
22
DEFINITION OF SELLING 23
SECTION 5. G.S. 20-286 reads as rewritten: 24
"§ 20-286. Definitions. 25
The following definitions apply in this Article: 26
… 27
(15a) Sell. – The terms "sell," "exchange," "retail sales," "selling activities," and 28
"lease" and their cognates are synonymous. Selling includes all of the 29
following: 30
a. Directly, or indirectly, offering or advertising for sale, taking deposits 31
or down payments, or receiving payment of any kind for the ordering, 32
reservation, purchase, lease, exchange, subscription, or use of a motor 33
vehicle. 34
b. Accepting a reservation for a specific motor vehicle identified by 35
Vehicle Identification Number or other product identifier from a retail 36
consumer. 37
c. Setting the retail price for the purchase, lease, or exchange of a motor 38
vehicle. 39
d. Offering or negotiating terms for the purchase, lease, finance, or 40
exchange of a motor vehicle with a retail consumer. 41
e. Negotiating directly with a retail consumer the value of a motor 42
vehicle being traded in as part of the purchase, lease, exchange, 43
subscription, or use of a motor vehicle. 44
f. Offering or negotiating directly with a retail consumer any service 45
contract, extended warranty, vehicle maintenance contract, guaranteed 46
asset protection agreement, or any other vehicle-related products and 47
services in connection with the purchase, lease, or exchange of a motor 48
vehicle. 49
g. Any transaction where the title of a motor vehicle or a used motor 50
vehicle is transferred to a retail consumer. 51 General Assembly Of North Carolina Session 2025
House Bill 406-First Edition Page 9
h. Any retail lease transaction where a retail consumer leases a vehicle 1
for a period of at least 12 months. 2
(15a)(15b) Special tool or essential tool. – A tool designed and required by the 3
manufacturer or distributor and not readily available from another source that 4
is utilized for the purpose of performing service repairs on a motor vehicle 5
sold by a manufacturer or distributor to its franchised new motor vehicle 6
dealers in this State. 7
…." 8
9
CLARIFY DEALERSHIP SUCCESSION 10
SECTION 6. G.S. 20-305(7) reads as rewritten: 11
"(7) Notwithstanding the terms of any contract or agreement, to prevent or refuse 12
to honor the succession to a dealership, including the franchise, by a motor 13
vehicle dealer's designated successor as provided for under this subsection. 14
The following applies: 15
a. Any owner of a new motor vehicle dealership may appoint by will, or 16
any other written instrument, a designated successor to succeed in the 17
respective ownership interest or interest as principal operator of the 18
owner in the new motor vehicle dealership, including the franchise, 19
upon the retirement, death or incapacity of the owner or principal 20
operator. In order for succession to the position of principal operator 21
to occur by operation of law in accordance with sub-subdivision c. 22
below, the owner's choice of a successor must be approved by the 23
dealer, in accordance with the dealer's bylaws, if applicable, either 24
prior or subsequent to the death or incapacity of the existing principal 25
operator. 26
…." 27
28
UNFINISHED VEHICLES AND COST OF TRAINING REQUIREMENTS 29
SECTION 7. G.S. 20-305 reads as rewritten: 30
"§ 20-305. Coercing dealer to accept commodities not ordered; threatening to cancel 31
franchise; preventing transfer of ownership; granting additional franchises; 32
terminating franchises without good cause; preventing family succession. 33
It shall be unlawful for any manufacturer, factory branch, distributor, or distributor branch, 34
or any field representative, officer, agent, or any representative whatsoever of any of them: 35
… 36
(58) To sell, transfer to floor plan, assign a certificate of origin, or otherwise require 37
a dealer to accept ownership or possession of a new motor vehicle that either 38
(i) cannot be immediately sold at retail due to the existence of an open recall, 39
missing or inoperable part or component, or stop sale order or (ii) has not 40
actually been delivered to a dealer within 90 days after the manufacturer or 41
distributor has represented to the dealer that the vehicle was shipped. 42
(59) To vary the price charged to a dealer for any training, software, equipment, or 43
tools that is in any way based upon a dealer's compliance with a facility image 44
program or requirement." 45
46
WARRANTY REIMBURSEMENT CLARIFICATIONS 47
SECTION 8. G.S. 20-305.1 reads as rewritten: 48
"§ 20-305.1. Automobile dealer warranty and recall obligations. 49
(a) Each motor vehicle manufacturer, factory branch, distributor or distributor branch, 50
shall specify in writing to each of its motor vehicle dealers licensed in this State the dealer's 51 General Assembly Of North Carolina Session 2025
Page 10 House Bill 406-First Edition
obligations for preparation, delivery, pre-sale maintenance, manufacturer-directed component 1
installation or assembly, warranty, manufacturer-sponsored maintenance programs, 2
manufacturer extended warranty, parts exchange programs, and recall service on its products. 3
The disclosure required under this subsection shall include the schedule of compensation to be 4
paid the dealers for parts, work, and service in connection with preparation, delivery, warranty, 5
and recall service, and the time allowances for the performance of the work and service. In no 6
event shall the schedule of compensation fail to include reasonable compensation for diagnostic 7
work, shipping, if required by the manufacturer or distributor, and for battery disposal or other 8
disposal charges or airbag shipping, storage, or disposal, for shipping, storage, or disposal of any 9
other parts, fluids, or vehicle components, and for all other associated fees that were actually 10
incurred by the dealer, and associated administrative requirements as well as repair service and 11
labor. Time allowances for the performance of preparation, delivery, warranty, and recall work 12
and service shall be reasonable and adequate for the work to be performed. The compensation 13
paid under this section shall be reasonable, provided, however, that under no circumstances shall 14
the reasonable compensation under this section for warranty and recall service be in an amount 15
less than the dealer's current retail labor rate and the amount charged to retail customers for the 16
manufacturer's or distributor's original parts for nonwarranty work of like kind, provided the 17
amount is competitive with the retail rates charged for parts and labor by other franchised dealers 18
of the same line-make located within the dealer's market. If there is no other same line-make 19
dealer located in the dealer's market or if all other same line-make dealers in the dealer's market 20
are owned or operated by the same entities or individuals as the dealership being compared, the 21
retail rates charged for parts and labor by other franchised dealers located in the dealer's market 22
that sell competing line-make motor vehicles as the dealer may be considered when determining 23
whether the dealer's rates are competitive.kind. 24
… 25
(a5) A motor vehicle dealer may accept a manufacturer's, factory branch's, distributor's, or 26
distributor branch's labor time guide as adequate and fair compensation for labor services 27
rendered for repairs in an amount equal to the amount a retail customer pays for the same labor 28
services with regard to labor time or may elect to establish an average retail labor time allowance 29
pursuant to subsection (a6) of this section. 30
(a6) A motor vehicle dealer may elect to establish an average retail labor time allowance 31
in lieu of the manufacturer's, factory branch's, distributor's, or distributor branch's labor time 32
guide for manufacturer, factory branch, distributor, or distributor branch-paid repairs or service 33
by submitting to the motor vehicle manufacturer, factory branch, distributor, or distributor branch 34
100 sequential customer paid service repair orders or 90 days of customer paid service repair 35
orders, whichever is less, covering repairs made no more than 180 days before the submission, 36
and dividing the total number of hours allowed by the franchisor for any such repairs under the 37
franchisor's labor time guide into the total number of hours actually billed to the franchisee's 38
retail customers and declaring the average percentage labor time allowance over the franchisor's 39
labor time guide for franchisor-paid repairs or service. The resulting quotient shall be applied to 40
the applicable manufacturer, factory branch, distributor, or distributor branch labor time guide to 41
establish the motor vehicle dealer's average retail labor time allowance. The average retail labor 42
time allowance so declared shall go into effect 30 days following the declaration subject to audit 43
by the motor vehicle manufacturer, factory branch, distributor, or distributor branch only of the 44
sample submitted by the motor vehicle dealer and any adjustment of the average labor time 45
allowance made by the motor vehicle manufacturer, factory branch, distributor, or distributor 46
branch based only on an audit of that sample. 47
…." 48
49
LOANER VEHICLE COST REIMBURSEMENT 50
SECTION 9. G.S. 20-305(33) reads as rewritten: 51 General Assembly Of North Carolina Session 2025
House Bill 406-First Edition Page 11
"(33) To fail to reimburse a dealer located in this State in full for the actual cost, 1
including applicable taxes and third-party fees, of providing a loaner or rental 2
vehicle to any customer who is having a vehicle serviced at the dealership if 3
the provision of such a loaner or rental vehicle is required or approved by the 4
manufacturer. It is unlawful for a manufacturer to fail to reimburse the dealer 5
in full as provided above (i) whether or not the dealer provides the customer 6
with a model vehicle similar to the vehicle the customer brought in for service, 7
in the event the dealer does not have a similar model loaner or rental vehicle 8
available, or (ii) if the provision of a rental or loaner vehicle to a customer is 9
required or approved by the manufacturer or distributor and further provided 10
that all or any portion of the time the dealer has provided the customer with a 11
loaner or rental vehicle is due to the unavailability of one or more parts sold 12
or distributed by the manufacturer or through a supplier designated or 13
approved by the manufacturer.manufacturer, or whether or not the 14
manufacturer has its own loaner program in which the dealer has elected not 15
to participate. The manufacturer shall allow a dealer to submit a claim for 16
rental vehicle reimbursement as required pursuant to this subdivision, in 17
30-day increments, prior to the end of the rental vehicle period if the repair 18
for which the rental vehicle is associated is open due to a delay in parts or 19
repair information from the manufacturer, factory branch, distributor, or 20
distributor branch." 21
22
SEVERABILITY CLAUSE 23
SECTION 10. If any provision of this act or its application is held invalid, the 24
invalidity does not affect other provisions or applications of this act that can be given effect 25
without the invalid provisions or application and, to this end, the provisions of this act are 26
severable. 27
28
EFFECTIVE DATE 29
SECTION 11. This act is effective when it becomes law and applies to all current 30
and future franchises and other agreements in existence between any new motor vehicle dealer 31
located in this State and a manufacturer or distributor as of the effective date of this act. 32