I saw this article the other day about the economic effects the current climate will have on the automotive repair industry.
It’s twofold – yes, more people will put off routine maintenance and drive older cars as credit evaporates for new car purchases, leading to more work for technicians and shops – but the concern I have are the types of scams people are willing to pull as desperation sinks in when their cars need repair.
It’s a fact of life that when times get tough, people’s moral compass doesn’t always point north. There are many instances where a customer will authorize thousands of dollars of major repair, only to come back, claim he never authorized said repair, call the BAR, the BBB, and file a small claims court action against the shop, threatening to sue on every cause of action under the sun.
Another favorite is the payment plan option – where a customer needs to pay over time, but needs the car for work, taking the kids to school, etc., and the shop agrees, only to never see another payment or the car ever again.
One scam I heard of was having the car work finished, then using a spare key to drive the car out of the shop’s parking lot, using bolt cutters to cut gate locks, then taking said car to the local dealership, using it for a trade in the next day, walking away with a new car using your fresh work as a down payment.
So how do you protect yourself from these types of situations?
Here are some helpful hints.
If you agree to take payment plans, draw up a simple contract that outlines the specific terms – it can be simple – I agree to pay in weekly, monthly, etc…
California provides repossession of a car derived from a shops possession through fraud, device, or trickery – if you have someone who pays with a credit card, then disputes the charges, or reneges on a payment plan, puts a stop order on a check, repossess the car as provided by statute, but make sure you do it right – the last thing you need is a charge of grand theft – but repossess that car. Don’t let your hard earned work walk out the door without a fight.
Make sure there’s a attorney’s fees provision in your work order – somewhere. An attorney’s fee provision, along with costs to collect in the event of breach of contract, allows the shop to collect the costs of collection of bad debt, from the repossession, taking someone to court, and or the costs to foreclose on a mechanics lien – a simple clause will make sure those costs become the defaulting customer’s responsibility.
Lock finished cars inside the shop – I doubt the aforementioned customer described above would enjoy the various felonies of breaking and entering, grand theft, and burglary that would accompany such endeavors.
Most importantly, make sure your work orders are done right – sometimes this is the only evidence you have of work performed as many times the car in question mysteriously disappears before a trial, hearing, or other judicial action.
Try and make the first payment, if the shop does a payment plan – after they draw up a contract – to cover all the parts. As shop owners, we can’t stand losing out of pocket money for parts. Labor losses are a little easier to stomach – as lost time is easier to deal with than the parts bill that still has to be paid – even if the customer doesn’t.
Say you perform $500 worth of work. The customer wants to pay $100 a week for 5 weeks. Your parts cost (not the invoice price, but your cost) was $125. Make the minimum first payment $125. You can wait a month or two for a hearing to recover your labor costs, but the parts house doesn’t understand “I’ll have it next month.” You cant afford to have your account closed.
Understand that after 15 days of presentment of invoice, 30 days after completion of work, your right to file a mechanics lien disappears. This means 30 days after completion, despite your iron clad, valid mechanics lien, you must release the car – and sue in court for you hard earned $.
What does this tell you? File the lien. Inform the customer you understand they need some time, or that they over extended themselves and are unable to pay for your services, but you have to file the lien within 30 days – it’s the law. If you don’t, you’ll be breaking the law holding their car any longer, along with losing your possessory mechanics lien. You can always stop the mechanics lien process, but after 15 or 30 days, depending on the circumstances, you can’t always start.
I hope these tips will help you during this very lucrative time for the automotive repair industry.
– William Ferreira