Managing the risks of having a used car lot

If you have a used car lot, there’s a lot going on during the day. You’ve got vehicles, you’ve got customers, you’ve got employees, maybe you’ve even got a repair shop or facility. In short, there’s a lot of moving parts (no pun intended). So, you might be wondering how you can protect your business. How can you mitigate the risks of having a used car lot? Here are a few tips for managing your risks.

Managing the risks of a used car lot.

Property risk.

First of all, you’ve got to understand the risks that you’re facing. If you’ve got repair operations, you’ve got a lot of flammable things lying around (paint, oil, degreasers, lubricants, etc.) You also may do welding or spray painting, which come with their own sets of risks. And since cars are often appealing targets for theft, there’s that risk to mitigate. At any rate, here are a few tips.

  • Make sure to label, store, and keep all flammable material safety.
  • Spray-painting work should be done using a well-ventilated booth with UL-approved wiring and fixtures.
  • Welding requires proper handling of tanks and gases and it should be separated from other operations with a welding curtain.
  • Enforce good housekeeping and tidiness. Remove trip hazards, keep greasy rags in covered metal containers, and make sure everyone is tidying their workplaces on the regular.
  • Have theft deterrents, such as chains, fences, proper lighting, and an alarm system.


Money is kind of a big part of doing business, but sometimes that money can disappear with the help of an employee or burglar. Here are a few tips for keeping your money and security safe.

  • Do background checks on employees.
  • Monitor your inventory.
  • Keep an eye on the cash register.
  • Divide responsibilities that deal with money among different employees.
  • Do regular bank drops.
  • Conduct a physical audit once a year.

Used car lot insurance

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Auto dealers exposures.

Auto dealers exposures can come because you welcome customers on your premises. (Auto sales and operations can also add to your auto dealers risk.) Basically, if someone is hurt on your premises, you could have a situation on your hands. Here are a few tips to help you manage your risk.

  • Keep trip hazards at bay.
  • Make sure that all floor coverings in the showroom are in good condition with no fraying, no worn spots, no cracks, and no holes.
  • Mark any steps or uneven sections of the floor to warn people that they need to watch their step.
  • Have plenty of exits from the building and make sure you mark them well.
  • Have back-up lighting in case the power goes out.
  • Have a designated waiting area for customers.
  • Don’t allow customers into the repair/service center.
  • Make sure you’re maintaining your parking lot and sidewalk by keeping them in good repair, removing snow and ice, and removing trip and fall hazards.
  • Have lots of lighting and appropriate security measures.
  • Remember that vehicles in open lots can be attractive nuisances and that you need chains and fences so you can prevent trespassing.
  • Have a check-off procedure in place for when you return a car to its driver.

Automobile risk.

If you’ve got a used car lot, you’ve got a lot of automobile-related risks since you’ve got employees driving cars and potential customers taking vehicles for test drives. To reduce the risk this presents…

  • Make sure that your employees who will drive your vehicles have valid licenses.
  • Check the employee drivers’ MVRs regularly.
  • Maintain vehicles properly and keep the records.
  • Have written policies concerning personal and permissive use of vehicles you allow employees to drive.
  • Have a protocol for test drives – i.e. have a sales professional accompany the customer, verify the customer’s driver’s license.
  • Manage any towing exposures by hiring experienced tow truck drivers and regularly checking/maintaining towing vehicles.
  • Manage risk of renting vehicles to customers by:
    • Keeping a copy of the driver’s license and proof of insurance.
    • Make sure the rental contract identifies allowed drivers and states that unlicensed or minor drivers aren’t allowed.
    • Have a hold-harmless agreement where the renter agrees to take responsibility for the driving of the car, limiting the business’s liability to vicarious liability.
    • Have a collision waiver with the customer’s signature to affirm whether or not they purchased it or not.
    • Have a pre-inspection form signed by the customer so as to minimize potential trouble if a rental vehicle is returned damaged.


Garagekeepers risk comes if you take care, custody, and control of your clients’ cars – for example, while they’re at the service station for repairs. Control your garagekeepers risk by:

  • Preventing access to these vehicles.
  • Keeping the keys to customer cars in a locked box.
  • Require identification when the client comes to pick up their car to prevent giving the car to the wrong person.

Environmental exposure.

Your environmental exposure can come from underground fuel tanks and getting rid of oil and hazardous waste from repair operations.

  • Test underground tanks and pipes for leaks regularly.
  • Have protocol and procedures in place to prevent leaks or contamination.
  • Have contracts in place to dispose of dangerous chemicals properly.

Workers’ comp.

You’ve got to protect your employees, not only with workers’ comp insurance but by providing a safe place to work. If you’ve got a service station, keep the following tips in mind:

  • Make sure your employees are properly trained.
  • Maintain all vehicle hoists and inspect them to prevent falls.
  • Teach your employees how to lift properly to reduce the chance of back strains and hernias.
  • Reduce trip and fall risks.
  • Provide proper safety equipment.
  • Only allow refueling in well-ventilated areas to reduce the risk of breathing in harmful fumes.
  • Make sure information about chemicals is accessible to all employees, and ensure that this information includes the early warning signs of problems.

So, this might seem like a lot of risks and a lot of ways for disaster to befall your business. However, with a little bit of risk management you can protect your business from a catastrophe.

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And another way to do that is by getting the right used car lot insurance. Our team can help with that. We can help you get the insurance you need to protect yourself from the risks you face. Get started with your quotes by filling out our online form, giving us a call, or messaging us on LiveChat.