Dealer Insights - July/August 2012 - How Alive is Your Code of Ethics?

July 01, 2012

Develop procedures and train employees for the best results 

Ethics. Merriam-Webster defines this as a set of moral principles, a theory or system of moral values, a guiding philosophy, or the principles of conduct governing an individual or a group.

When it comes to personal ethics, people’s philosophies and conduct vary greatly. So when it comes to ethics at your auto dealership, where do you turn for guidance? And how do you make sure ethical practices are followed at your store?


If you’re a member of the National Automobile Dealers Association (NADA), you’re likely familiar with that organization’s code of ethics. NADA requires its members to fully comply with all federal, state and local laws governing their businesses and to pledge to:

  • Operate the dealership in accordance with the highest standards of ethical conduct,
  • Treat each customer in a fair, open and honest manner and fully comply with all laws that prohibit discrimination, and
  • Represent products clearly and factually, standing fully behind warrants, direct and implied, and in all other ways justifying the customer’s respect and confidence.

Other parts of the code set ideals for advertising, repair work and written service estimates, resolving customer concerns, and other matters.


As with NADA’s code of ethics, state codes are typically broad and all-encompassing. For instance, the Washington State Independent Auto Dealers Association states that members have “a general duty of integrity, honor and fair dealing toward the general public.” Another example: The Alabama Independent Automobile Dealers Association holds that it “will not perform any act which would bring disrepute” to the industry.

So, you may ask, how exactly do these ethical ideals translate to dealer interactions with the single woman who wants to buy a reliable used car for $5,000, the father of a large family who wants to finance his new SUV for five years, or the grandmother who wants to get rid of that “clanging noise” she hears under her sedan’s hood? Fortunately, there is more detailed advice.


In addition to its code of ethics, NADA publishes an “Ethics Guide,” which covers four areas of a dealership’s operation: advertising, financial services, sales and service. First, the guidelines stress that dealers should abide by local, state and federal laws relating to auto dealerships, including the Truth in Lending Act. And the guide presents more detailed guidelines for ethical behavior in each operational area. For example:

  • Sales personnel should “provide each customer with a thorough and clear explanation of the steps involved in the purchase or lease of a vehicle and follow those steps diligently.”
  • Financial services guidelines dictate that employees must fully disclose to customers “the costs, terms and contractual obligation of credit and lease transactions,” and that documents be written in “a simple, plain and unambiguous manner.”
  • Service guidelines require that dealerships, when appropriate, recommend corrective and maintenance services, “explaining to the customer which of these are required to correct existing problems and which are for preventive maintenance.”

As you review the day-to-day activities of your employees under an ethics microscope, you’ll likely see areas where procedures should be put in place to support guidelines such as the ones described above. State and federal laws will prompt some of the procedures. And you may find a need to set additional rules.

What if, for example, you have concerns about how service personnel describe repair estimates to customers? You could establish a procedure whereby customers sign a store copy of their repair estimate.


Once you have a code of ethics and related procedures in place, you’ll need to train your staff. Outside trainers can be a good source of expertise in areas with compliance considerations and ethical overtones, such as presenting finance and insurance options to customers. Or you may prefer to develop your own in-house training program. (See the sidebar “Keep it simple.”)


Review your code of ethics and related procedures today — and begin to develop these process controls if you’re lacking them. Your CPA can assist you in creating procedures that will deter employees from acting unethically — and help your dealership build the respect from customers that it deserves. 


In-house ethics training need not be complex. One tried-and-true technique involves sitting down and talking to your managers. Have them share stories about real-life ethical situations that have come up over the years.

Select a trainer — someone from your top ranks who has perhaps gone through ethics training him- or herself — who can relate those stories to your trainees and have them discuss how they would have handled the situation. Then the trainer should comment on what would be considered ethical behavior by the dealership and what would be viewed as unethical behavior. 

Ethics in any organization starts with the “tone at the top.” Involvement and support by management is essential to a strong ethics program.


Dealer Insights - July/August 2012 Issue


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