Iowa Auto Dealer Compliance Checklist for 2026: Key Regulations Every Dealership Must Follow

Compliance violations can cost Iowa dealerships their licenses, expose them to criminal liability, and result in substantial fines. Understanding auto dealer compliance requirements protects your dealership’s future. This comprehensive checklist covers the key regulations every Iowa dealership must follow in 2026, from dealer licensing to federal FTC compliance to warranty documentation.

Why Auto Dealer Compliance Matters in Iowa

Compliance violations carry serious consequences for Iowa dealerships. Non-compliance can result in license suspension or revocation, substantial fines, civil litigation from customers or lenders, and in severe cases, criminal charges. The case of State v. Friedley illustrates how selling vehicles out of trust can result in charges for first-degree theft and ongoing criminal activity, with sentences up to 20 years in federal prison.

Iowa dealerships operate under both state and federal regulations. The Iowa Department of Transportation oversees dealer licensing, while the Federal Trade Commission enforces national standards through rules like the Used Car Rule. Understanding these requirements protects your dealership’s license, reputation, and financial stability.

License suspension, criminal liability, and civil suits represent the three primary risks dealerships face without proper compliance systems.

The Cost of Compliance Failures

Compliance failures cost dealerships far more than the initial fines. When a dealership loses its license, it loses its ability to operate. Criminal charges against dealership principals can result in personal liability, prison time, and reputational damage that extends beyond the business. Civil suits from customers or lenders can drain resources and create ongoing legal expenses.

The most damaging compliance failures are those that could have been prevented. Dealerships that implement proper compliance systems, maintain accurate documentation, and work with experienced legal counsel avoid these costly violations. At Arenson Hofmeyer PC, we help dealerships prevent costly violations before they occur.

Why Choose Arenson Hofmeyer PC for Your Dealership Compliance Needs

Dealership compliance requires more than legal knowledge. It requires understanding how dealerships actually operate. James Arenson, managing member of Arenson Hofmeyer PC, brings 22 years of hands-on experience as a dealer principal and franchise owner. He operated Chevrolet, Mercedes-Benz, and Volvo dealerships across Iowa, giving him insider knowledge of the challenges dealerships face daily.

Arenson Hofmeyer PC combines this practical dealership experience with over 100 years of combined legal expertise. The firm holds AV Preeminent ratings (4.6 out of 5) and maintains membership in the National Association of Dealer Counsel and Iowa State Bar Association. This combination of real-world dealership experience and legal credentials means we understand your compliance challenges from the inside.

Iowa Dealer Licensing Requirements and Renewal

Iowa requires dealerships to obtain and maintain proper licensing through the Iowa Department of Transportation. Licensing requirements vary based on dealership type:

• New Car Dealers: Must hold a franchise agreement with a manufacturer
• Used Car Dealers: Can operate independently or with multiple franchises
• Independent Used Car Dealers: Operate without manufacturer franchises

All applicants for a used motor vehicle dealer license must complete an eight-hour prelicensure education program before submitting their license application. This requirement ensures dealership principals understand Iowa’s regulatory framework.

Dealer licenses require biennial renewal by December 31 of even-numbered years. During renewal, dealerships must complete a five-hour continuing education course within 24 months prior to renewal. This is distinct from the eight-hour prelicensure education required for initial licensing. Dealerships must demonstrate ongoing compliance with state and federal regulations, maintain proper documentation, and confirm that all dealership personnel meet licensing requirements. Failure to renew by the deadline may result in license suspension or revocation.

License applications require proof of education completion, financial documentation, facility inspection, and background checks.

Maintaining Your Dealer License

Your dealer license is your authorization to operate. Maintaining it requires ongoing attention to compliance obligations. Dealerships must keep accurate records of all vehicle transactions, maintain proper documentation for each sale, and report any changes to the Iowa Department of Transportation promptly.

Annual compliance obligations include maintaining your dealership facility in compliance with state standards, ensuring all sales staff are properly trained on compliance requirements, and conducting regular audits of your documentation practices. If your dealership changes ownership, location, or franchise agreements, you must notify the Iowa Department of Transportation within the required timeframe.

Record-keeping requirements are strict. Dealerships must maintain records of all vehicle purchases, sales, and floor plan transactions. These records should be organized and readily available for inspection by regulatory agencies. Proper record-keeping demonstrates your commitment to compliance and protects your dealership if disputes arise.

Federal FTC Compliance for Auto Dealers

The Federal Trade Commission enforces national standards for auto dealer advertising and sales practices through the Used Car Rule and general unfair or deceptive practices standards (Section 5 UDAP). The Used Car Rule requires dealers to provide clear, accurate information about vehicles and prohibits deceptive practices.

Important Note on the FTC CARS Rule: The Federal Trade Commission’s Comprehensive Automobile Remarketing Sales (CARS) Rule was vacated by the U.S. Court of Appeals for the Fifth Circuit on January 27, 2025, and is no longer enforceable. Iowa dealerships are not required to comply with the CARS Rule. Dealerships remain subject to the FTC Used Car Rule and general FTC Section 5 UDAP standards.

Key FTC Used Car Rule requirements include:

• Accurate Vehicle Descriptions: All advertised vehicles must be accurately described with correct mileage, condition, and features
• Clear Pricing: Total price must be clearly displayed, including all fees and charges
• Warranty Disclosures: Dealers must clearly disclose whether vehicles are sold “as is” or with warranties
• Buyer’s Guides: Federal Buyer’s Guides must be provided for all used vehicles
• Odometer Statements: Accurate odometer readings must be documented and disclosed

For 2026, dealerships should review their advertising practices across all platforms to comply with the FTC Used Car Rule. The FTC continues to enforce these standards and maintains authority to pursue deceptive advertising claims under Section 5 UDAP.

FTC compliance checkpoints include: vehicle descriptions, pricing transparency, warranty disclosures, Buyer’s Guide provision, and odometer accuracy.

Advertising and Marketing Compliance

Your dealership’s advertising must comply with FTC standards. This means avoiding claims that cannot be substantiated, providing clear pricing information, and disclosing all material terms of any offer.

Restrictions on claims are important to understand. You cannot make claims without clear substantiation. All advertising claims must be truthful and not misleading. If you advertise a vehicle’s condition, features, or history, that information must be accurate.

Required disclosures in ads include the total price of the vehicle, any fees or charges, warranty status, and any conditions on the offer. Digital advertising compliance means ensuring that all online listings include the same information as print advertising. Social media and online listing requirements are the same as traditional advertising. All claims must be accurate, and all material terms must be disclosed.

Essential Dealer Paperwork and Documentation

Proper documentation protects dealerships from compliance violations and disputes. Essential dealer paperwork includes:

• Buyer’s Guides: Federal Trade Commission Buyer’s Guides for all used vehicles
• Odometer Statements: Accurate odometer disclosures for all vehicles
• Title Documentation: Proper title transfer documentation and lien holder information
• Sales Contracts: Complete sales contracts with all terms clearly stated
• Financing Disclosures: Truth in Lending Act (TILA) disclosures for financed purchases
• Floor Plan Agreements: Documentation of floor plan arrangements with lenders
• Warranty Documentation: Clear warranty terms or “as is” disclaimers

Dealerships should maintain records for a minimum of three years. This documentation demonstrates compliance if regulatory agencies conduct audits or if disputes arise with customers or lenders.

Must-have documents every dealership needs include Buyer’s Guides, odometer statements, sales contracts, financing disclosures, and warranty documentation.

Avoiding “Selling Out of Trust” Violations

Selling out of trust occurs when a dealership uses proceeds from vehicle sales to cover dealership expenses instead of paying off floor plan lenders. This practice is illegal and can result in criminal charges.

Criminal and civil consequences are severe. To be found guilty of theft under Iowa Code § 714.1(5), a dealership principal must have the specific intent to defraud the floor planner. If a dealership principal directs or allows out of trust sales with the intent to defraud the lender, criminal liability follows. Federal prosecutors typically charge repeated, intentional “selling out of trust” as wire fraud (up to 20 years under 18 U.S.C. § 1343) or bank fraud (up to 30 years under 18 U.S.C. § 1344 if a federally insured lender is defrauded). Actual sentences are typically lower and determined by the U.S. Sentencing Guidelines based on loss amount, number of transactions, and other factors.

Civil consequences include breach of contract claims from floor plan lenders and customers. Floor plan lenders can sue the dealership and any guarantors. Customers may bring claims when they realize they lack title to the vehicle sold out of trust.

Best practices for floor plan management include maintaining separate trust accounts for floor plan funds, reconciling floor plan accounts regularly, and ensuring that all vehicle proceeds are paid to lenders as required by floor plan agreements. Transparency with lenders is critical. If your dealership encounters cash flow problems, contact your lender immediately to discuss options rather than using vehicle proceeds for other expenses.

Vehicle Warranty Compliance and “As Is” Sales

Iowa law recognizes two implied warranties on used vehicle sales: the Implied Warranty of Merchantability and the Implied Warranty of Fitness for a Particular Purpose.

The Implied Warranty of Merchantability requires that a used vehicle be in reasonably safe condition, substantially free of defects that could render it inoperable, and perform at the level reasonably expected for a vehicle of the same age, mileage, and price. A purchaser can bring a claim under this warranty if the vehicle is not merchantable, the purchaser is proximately damaged, and the purchaser gives the dealership timely notice of the defect.

The Implied Warranty of Fitness for a Particular Purpose applies when a customer purchases a vehicle for a specific purpose (such as hauling trailers) and relies on the dealership’s recommendation. The vehicle must be fit for that stated purpose. If you sell a vehicle knowing the customer needs to haul two tons but the vehicle can only handle one ton, the customer may have a claim under this warranty.

Dealerships can exclude these implied warranties by selling vehicles “as is.” However, if a dealership provides any warranty—even a limited 60 or 90-day warranty—the “as is” status is lost and implied warranties apply. The Magnuson-Moss Warranty Act allows dealers to limit implied warranties to match the duration of express warranties if proper language is used.

Warranty compliance requires clear “as is” language, proper disclaimers, or limited warranty terms that comply with the Magnuson-Moss Warranty Act.

Frequently Asked Questions About Iowa Auto Dealer Compliance

What are the most common compliance violations Iowa dealerships face?

The most common compliance violations include improper warranty disclosures, inadequate advertising disclosures, floor plan violations, and documentation failures. Many dealerships fail to provide proper Buyer’s Guides or fail to clearly disclose warranty status. Advertising violations occur when dealerships make claims they cannot substantiate or fail to disclose material terms. Floor plan violations happen when dealerships fail to pay off vehicles as required by floor plan agreements. Documentation violations occur when dealerships fail to maintain proper records or fail to provide required disclosures to customers.

How often do I need to renew my Iowa dealer license?

Iowa dealer licenses require biennial renewal by December 31 of even-numbered years. You must complete a five-hour continuing education course within 24 months prior to renewal. This is distinct from the eight-hour prelicensure education required for initial licensing. You should contact the Iowa Department of Transportation or consult with your attorney to confirm your specific renewal requirements. Failing to renew your license on time can result in license suspension or revocation.

What should I do if I discover a compliance issue at my dealership?

If you discover a compliance issue, contact an attorney immediately. Do not attempt to cover up the issue or ignore it. The best approach is to work with your attorney to develop a corrective action plan, notify the appropriate regulatory agencies if required, and implement systems to prevent the issue from recurring. Transparency with regulators and lenders is critical. Attempting to hide compliance issues typically results in more severe consequences than addressing them proactively.

Are there differences between new car and used car dealer compliance requirements?

Yes, there are significant differences. New car dealers must comply with manufacturer franchise agreements in addition to state and federal requirements. Used car dealers have different documentation requirements and may have different warranty obligations depending on whether they sell “as is” or with warranties. Independent used car dealers have fewer franchise-related requirements but must still comply with all state and federal regulations. Understanding your specific compliance obligations based on your dealership type is critical.

What documentation should I keep for compliance purposes?

You should maintain records of all vehicle transactions, including purchase documents, sales contracts, financing disclosures, warranty documentation, and odometer statements. Keep records for a minimum of three years. Organize your records so they are readily available for inspection. Proper documentation demonstrates your commitment to compliance and protects your dealership if disputes arise or regulatory agencies conduct audits.

How does FTC compliance affect my dealership’s operations?

FTC compliance affects your advertising, sales practices, and documentation requirements. You must ensure that all advertising is accurate and includes required disclosures. Your sales staff must provide Buyer’s Guides and warranty disclosures to customers. Your documentation must be complete and accurate. FTC standards apply to all advertising channels—online, print, social media, and in-person. Compliance requires attention to detail and ongoing training for your sales staff.

Get Compliance Guidance from Arenson Hofmeyer PC

Compliance violations are preventable with proper guidance and systems. Arenson Hofmeyer PC helps Iowa dealerships stay compliant with state and federal regulations, protecting your license and your business.

If you have questions about auto dealer compliance, need a compliance audit, or want to review your dealership’s documentation practices, contact Arenson Hofmeyer PC today. Call (319) 363-8199 to schedule a consultation with an attorney who understands dealership operations from the inside.

We also assist dealerships with related matters including franchise acquisitions, buy-sell transactions, and dealership succession planning. Our team is ready to help you navigate the complex compliance landscape and protect your dealership’s future.