Page 44 - GIADA-Dec 2017-Final

Document Retention &

Document Disposal for Dealers

By Eric Gregory

It is the end of the year and you may be deal jacket and take out and destroy some considering disposal. Finally, you need to
proactively thinking of “cleaning house”. documents while maintaining others. For determine the length of your typical retail
With that in mind you need to determine example, in your deal jacket, you need to installment contract. Contracts which are
which documents to keep and how to dispose keep Retail Installment contracts that have performed over time such as finance and
of those you are ready to part with. Bear in been assigned for ten years. But wait, if the service contracts should all be kept for ten
mind, this is not designed to be legal advice retail installment contract is not assigned years past their expiration. I believe that
or representation to you or your dealership. you only need to keep it seven years. Wow, most dealers should keep deal files for at
It is intended as informational and that is confusing… least ten years. If you have long-term finance
educational; always check with your attorney contracts, you should likely maintain the
when applying general principles to specific What is a dealer to do? In my practice, I deal files for even longer to give the dealer
facts. There are many different resources like dealers to air on the side of caution plenty of time to mitigate the risk of disposal.
for document retention requirements, and simplicity as too little caution, and too You decide and put it into a record retention
and the information and advice are often much complexity often leads to costly issues. policy. If you have a reasonable record
conflicting. When confused, always check If you are like most dealers once a deal is retention policy, you have taken the first step
with your dealership's accountant and closed you seldom look at the file again in protecting you and your dealership. Once
lawyer to define your dealerships document unless there is not an issue with the data, a record retention policy is in place you can
retention policy. There are various statutes customer, etc.. With that in mind think of rely on a reasonable record retention policy
and laws to determine retention periods, document retention from the perspective of if you have destroyed records which are
your dealership likely has contractual a future issue or problem. If you encounter later requested of you. However, to use the
obligations related to retention, and finally, a problem down the road with a customer, procedure as a defense, you should exercise
you may need records to preserve the facts the department of revenue, a bank or the your rules and discard documents on a
if future issues arise. IRS, would you like to be able to document regular (at least yearly) basis.
the problem? Would you want the ability to
The first level of confusion starts when a show the details of the sale or transaction? Before you destroy and properly dispose of
dealer must determine what category the Would you like to have a full gambit of any records, you still should consider the fact
document fits within. For example, is it a documents to remind you and the other that there are many records that you must
"Car Invoice" or a "Car Purchase order," one party of the details? Before you answer that, keep permanently. For example, Corporate
expert retention source states that you need let's go back to the Buyers Guide. Dealers are Articles, by-laws, minutes or other corporate
to save Car Invoices for six years and Car not required by statute to retain the Used documents must be retained permanently.
purchase orders for seven years… Similarly, Car Buyers' Guide, BUT if you do not keep Similarly, Legal and tax correspondence,
a Buyer's Guide in and of itself does not a signed copy, it will be difficult to prove data relating to environmental issues such
have a statutorily required time frame for that your customer received one. Often in a as underground storage tank testing, income
retention so theoretically a dealer might litigation setting the judge or fact-finder will tax returns, and IRS audits all need to be
not feel the need to retain it. That would "construe" the facts, the contract, etc. against retained permanently.
likely be an issue as the Buyers Guide is you if you do not have the documents to prove
generally "in the course of the trade" a part your position. Even though each record has Once you decide to dispose of a document
of a car "deal jacket." Deal Jackets should be a specific retention requirement(s) or lack and no longer need to retain it for either risk
kept much longer. How long you ask? That thereof, you should likely go by the longest mitigation, statute, contractual obligation or
depends on if you want to go through the time required for similar documents before Continued on page 44

42 | GIADA Independent Auto Dealer DECEMBER 2017