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GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2025
SESSION LAW 2025-41
SENATE BILL 295
*S295-v-5*
AN ACT TO CLARIFY VARIOUS MOTOR VEHICLE DEALER LAWS.
The General Assembly of North Carolina enacts:
PREVENT UNFAIR DEALER FRANCHISE TERMINATIONS AND CLARIFY RV
DEALER TERMINATION ASSISTANCE RIGHTS
SECTION 1. G.S. 20-305 reads as rewritten:
"§ 20 -305. Coercing dealer to accept commodities not ordered; threatening to cancel
franchise; preventing transfer of ownership; granting additional franchises;
terminating franchises without good cause; preventing family succession.
It shall be unlawful for any manu facturer, factory branch, distributor, or distributor branch,
or any field representative, officer, agent, or any representative whatsoever of any of them:
…
(4) Notwithstanding the terms of any franchise agreement, to prevent or refuse to
approve the sale or transfer of the ownership of a dealership by the sale of the
business, stock transfer, or otherwise, or the transfer, sale or assignment of a
dealer franchise, or a change in the executive management or principal
operator of the dealership, change in use of an existing facility to provide for
the sales or service of one or more additional line -makes of new motor
vehicles, or relocation of the dealership to another site within the dealership's
relevant market area, if the Commissioner has determined, if requested in
writing by the dealer within 30 days after receipt of an objection to the
proposed transfer, sale, assignment, relocation, or change, and after a hearing
on the matter, that the failure to permit or honor the transfer, sale, assignment,
relocation, or change is unreasonable under the circumstances. The following
applies:
…
i. It is unlawful for a manufacturer to, in any way, do any of the
following:
1. Condition its approval of a proposed transfer, sale, assignment,
change in the dealer's execu tive management, principal
operator, or appointment of a designated successor, on the
existing or proposed dealer's willingness to construct a new
facility, renovate the existing facility, acquire or refrain from
acquiring one or more line -makes of vehicle s, separate or
divest one or more line -makes of vehicle, or establish or
maintain exclusive facilities, personnel, or display space.
…
4. Condition, directly or indirectly, the approval of the sale or
transfer of the ownership of a dealership by the sale o f the
business, stock transfer, or otherwise, or the transfer, sale,
succession, or assignment of a dealer's franchise, or a change
Page 2 Session Law 2025-41 Senate Bill 295
in the executive management or principal operator of the
dealership, or a dealer's proposed relocation of the dealership
facility, or a dealer's satisfaction of the terms of any incentive
program or contest, upon the existing or proposed dealer's
willingness to enter into a right of first refusal in favor of the
manufacturer.
5. In determining whether to approve a dealer's proposed transfer,
sale, assignment, change in the dealer's executive management,
principal operator, or appointment of a designated successor,
to require an applicant to provide information about or base a
disapproval on whether another manufacturer or distributor
had previously denied, rejected, or otherwise turned down the
application of the applicant, or any person or entity affiliated
with the applicant, to acquire a franchise or dealership or
become principal operator, part of the executive management,
or a successor owner or manager of a dealership.
6. In determining whether to approve a dealer's proposed transfer,
sale, assignment, change in the dealer's executive management,
principal operator, or appointment of a designated successor,
to require an applicant to provide information about or base a
disapproval on whether the applicant, or any person or entity
affiliated with the applicant, had, for any reason, ever
previously commenced a civil or administrative proce eding
against any manufacturer or distributor.
j. If a manufacturer or distributor objects to, denies, rejects, or otherwise
turns down a dealer 's proposed transfer, sale, assignment, change in
the dealer's executive management, principal operator, or appointment
of a designated successor, the manufacturer or distributor shall
reimburse both the dealer and applicant for their respective attorney s'
fees, if the decision of the manufacturer or distributor to object to,
deny, reject, or otherwise turn down the dealer 's application is
ultimately overturned by a reviewing court or administrative agency ,
and after all appellate remedies within this State are exhausted, if it is
found that the turndown was unreasonable.
…
(6) Notwithstanding the terms, provisions or conditions of any franchise or
notwithstanding the terms or provisions of any waiver, to terminate, cancel or
fail to renew any franchise with a licensed new motor vehicle dealer unless
the manufacturer has satisfied th e notice requirements of sub -subdivision c.
of this subdivision and the Commissioner has determined, if requested in
writing by the dealer within (i) the time period specified in
G.S. 20-305(6)c.1.II., III., or IV., as applicable, or (ii) the effective date of the
franchise termination specified or proposed by the manufacturer in the notice
of termination, whichever period of time is longer, and after a hearing on the
matter, that there is good cause for the termination, cancellation, or
nonrenewal of the franchise and that the manufacturer has acted in good faith
as defined in this act regarding the termination, cancellation or nonrenewal.
When such a petition is made to the Commissioner by a dealer for
determination as to the existence of good cause and go od faith for the
termination, cancellation or nonrenewal of a franchise, the Commissioner
shall promptly inform the manufacturer that a timely petition has been filed,
Senate Bill 295 Session Law 2025-41 Page 3
and the franchise in question shall continue in effect pending the
Commissioner's decision. The Commissioner shall try to conduct the hearing
and render a final determination within 180 days after a petition has been filed.
If the termination, cancellation or nonrenewal is pursuant to
G.S. 20-305(6)c.1.III. then the Commissioner shall give th e proceeding
priority consideration and shall try to render his final determination no later
than 90 days after the petition has been filed. Any parties to a hearing by the
Commissioner under this section shall have a right of review of the decision
in a court of competent jurisdiction pursuant to Chapter 150B of the General
Statutes. Any determination of the Commissioner under this section finding
that good cause exists for the nonrenewal, cancellation, or termination of any
franchise shall automatically b e stayed during any period that the affected
dealer shall have the right to judicial review or appeal of the determination
before the superior court or any other appellate court and during the pendency
of any appeal; provided, however, that within 30 days of entry of the
Commissioner's order, the affected dealer provide such security as the
reviewing court, in its discretion, may deem appropriate for payment of such
costs and damages as may be incurred or sustained by the manufacturer by
reason of and durin g the pendency of the stay. Although the right of the
affected dealer to such stay is automatic, the procedure for providing such
security and for the award of damages, if any, to the manufacturer upon
dissolution of the stay shall be in accordance with G.S. 1A-1, Rule 65(d) and
(e). No such security provided by or on behalf of any affected dealer shall be
forfeited or damages awarded against a dealer who obtains a stay under this
subdivision in the event the ownership of the affected dealership is
subsequently transferred, sold, or assigned to a third party in accordance with
this subdivision or subdivision (4) of this section and the closing on such
transfer, sale, or assignment occurs no later than 180 days after the date of
entry of the Commissioner's or der. Furthermore, unless and until the
termination, cancellation, or nonrenewal of a dealer's franchise shall finally
become effective, in light of any stay or any order of the Commissioner
determining that good cause exists for the termination, cancellati on, or
nonrenewal of a dealer's franchise as provided in this subdivision, a dealer
who receives a notice of termination, cancellation, or nonrenewal from a
manufacturer as provided in this subdivision shall continue to have the same
rights to assign, sell , or transfer the franchise to a third party under the
franchise and as permitted under G.S. 20-305(4) as if notice of the termination
had not been given by the manufacturer. Any franchise under notice or threat
of termination, cancellation, or nonrenewal by the manufacturer which is duly
transferred in accordance with G.S. 20-305(4) shall not be subject to
termination by reason of failure of performance or breaches of the franchise
on the part of the transferor.
a. Notwithstanding the terms, provisions or conditions of any franchise
or the terms or provisions of any waiver, good cause shall exist for the
purposes of a termination, cancellation or nonrenewal when:
…
2. If the failure by the new motor vehicle dealer relates to the
performance of the new motor vehicle dealer in sales or
service, then good cause shall be defined as the failure of the
new motor vehicle dealer to comply with reasonable
performance criteria established by the manufacturer if the new
Page 4 Session Law 2025-41 Senate Bill 295
motor vehicle dealer was apprised by the manufact urer in
writing of the failure; and
…
II. The new motor vehicle dealer was afforded a
reasonable opportunity, for a period of not less than 180
days, to comply with the criteria; and
…
Good c ause for the termination, cance llation, or nonrenewal of a
dealer's franchise by a manufacturer does not exist and the dealer 's
franchise may not be terminated, canceled, or not renewed unles s it
has been determined that the manufacturer made available to the dealer
a sufficient number and model mix of new motor vehicle s for the
dealer to have made substantial progress toward compliance with the
manufacturer's performance criteria.
d. Payments.
1. Notwithstanding the terms of any franchise, agreement, or
waiver, upon the termination, nonrenewal or cancellation of
any franchise by the manufacturer or distributor, the cessation
of business or the termination, nonrenewal, or cancellation of
any franchise by any new motor vehicle dealer located in this
State, or upon any of the occurrences set forth in
G.S. 20-305(6)c.1.IV., the manufacturer or distributor shall
purchase from and compensate the new motor vehicle dealer
for all of the following:
I. Each new and unsold motor vehicle vehicle, and each
motorized or nonmotorized trailer, including , but not
limited to , travel trailers, slide -in truck campers , and
park models, if such trailers, campers, and models are
part of the franchise between the manufacturer or
distributor and the dealer, within the new motor vehicle
dealer's inventory that has been acquired within 24
months of the effective date of the termination from the
manufacturer or distributor or another same line -make
dealer in the ordinary course of business, and which has
not been substantially altered or damaged to the
prejudice of the manufacturer or distributor while in the
new motor vehicle dealer's possession, and which has
been driven less than 1,000 miles or, for purposes of a
recreational vehicle motor home as defined in
G.S. 20-4.01(32b)c., less than 1,500 2,500 miles
following the original date of delivery to the dealer, and
for which no certificate of title has been issued. For
purposes of this sub -subdivision, the term "ordinary
course of business" shall include inventory transfers of
all new, same line -make vehicles between affiliated
dealerships, or otherwi se between dealerships having
common or interrelated ownership, provided that the
transfer is not intended solely for the purpose of
benefiting from the termination assistance described in
this sub-subdivision.
…
Senate Bill 295 Session Law 2025-41 Page 5
f. The provisions of sub -subdivision e. abo ve shall not be applicable
when the termination, nonrenewal, or cancellation of the franchise
agreement by a new motor vehicle dealer is the result of the sale of
assets or stock of the motor vehicle dealership. The provisions of
sub-subdivisions d. and e. above shall not be applicable when the
termination, nonrenewal, or cancellation of the franchise agreement is
at the initiation of a new motor vehicle dealer of recreational vehicle
motor homes, as defined in G.S. 20-4.01(32b)c., provided that at the
time of the termination, nonrenewal, or cancellation, the recreational
vehicle manufacturer or distributor has paid to the dealer all claims for
warranty or recall work, including payments for labor, parts, and other
expenses, which were submitted by the deale r 30 days or more prior
to the date of termination, nonrenewal, or cancellation.
…."
DEALER COMPENSATION FOR THE SALE OF OVER -THE-AIR PRODUCTS AND
SERVICES
SECTION 2. G.S. 20-305(57) reads as rewritten:
"(57) To sell, or activate for a fee, any permanent or temporary motor vehicle
accessory, option, add-on, service, feature, improvement, or upgrade on or to
any motor vehicle owned or leased by a retail customer located in this State,
through over-the-air or remote means, unless the manufacturer or distrib utor
complies with all of the following requirements:
…
f. When providing a new motor vehicle to a dealer for offer or sale to the
public, the manufacturer or distributor shall provide to the dealer a
written disclosure that may be furnished by the dealer to a potential
purchaser or lessee of the new motor vehicle identifying each
permanent or temporary motor vehicle accessory, option, add -on,
service, upgrade, feature, or improvement of the vehicle that may be
initiated, updated, changed, or maintained by the manufacturer or
distributor through over-the-air or remote means, the cost to the retail
customer at the time of the new motor vehicle sale or lease, and the
fact that all such accessories, options, add -ons, services, upgrades,
features, or improvements may be purchased directly from the dealer.
Every manufacturer or distributor that, through over-the-air or remote
means, provides for a fee any permanent or temporary motor vehicle
accessory, option, add-on, service, feature, improvement, or upgrade
on or to any motor vehicle owned or leased by a retail customer located
in this State shall make available to each of its franchised dealers
within this State both of the following:
1. An itemized schedule of compensation the dealer will receive
for the sale of all over-the-air or remotely activated permanent
or tem porary motor v ehicle accessories, options, add -ons,
services, features, improvements, or upgrades offered by the
manufacturer or distributor. The manufacturer or distributor
shall promptly provide or make available to each of its
franchised dealers within this State an updated schedule of
compensation in the event there is a substan tive change in the
over-the-air or remotely activated products or services that are
Page 6 Session Law 2025-41 Senate Bill 295
being offered or a change in the compensation the
manufacturer or distributor is paying to the dealer.
2. Upon the dealer 's request via email or other form of written
communication, a statement itemizing the type, v olume, and
gross receipts generated from the sales of over -the-air or
remotely activated products and services that were sold to the
dealer's customers and calculating the fees and commissions to
which the dealer is entitled pursuant to this sub -subdivision
covering a period of time not to exceed the prior six months,
unless otherwise agreed by the manufacturer or distributor and
the dealer.
A manufacturer or distributor may comply with this sub -subdivision
by notifying the dealer that such information is available on a website
or by other digital means."
FACILITATE DEALER TRANSFER OF OWNERSHIP TO QUALIFIED BUYERS
SECTION 3. G.S. 20-305(4) reads as rewritten:
"(4) Notwithstanding the terms of any franchise agreement, to prevent or refuse to
approve the sale or transfer of the ownership of a dealership by the sale of the
business, stock transfer, or otherwise, or the transfer, sale or assignment of a
dealer franchise, or a change in the executive management or principal
operator of the dealership, change in use of an existing facility to provide for
the sales or service of one or more additional line -makes of new motor
vehicles, or relocation of the dealership to another site within the dealership's
relevant market area, if the Commissioner has determined, i f requested in
writing by the dealer within 30 days after receipt of an objection to the
proposed transfer, sale, assignment, relocation, or change, and after a hearing
on the matter, that the failure to permit or honor the transfer, sale, assignment,
relocation, or change is unreasonable under the circumstances. The following
applies:
…
e. With respect to a proposed change in the executive management or
principal operator of the dealership, the sole issue for determination
by the Commissioner and the sole issue on which the Commissioner
shall hear or consider evidence shall be whether, by reason of lack of
training, lack of prior experience, poor past performance, or poor
character, the proposed candidate for a position within the executive
management or as principal operator of the dealership is unfit for the
position. For purposes of this subdivision, the refusal by the
manufacturer to accept a proposed candidate for executive
management or as principal operator who is of good moral character
and who other wise meets the written, reasonable, and uniformly
applied standards or qualifications, if any, of the manufacturer relating
to the business experience and prior performance of executive
management required by the manufacturers of its dealers is presumed
to demonstrate the manufacturer's failure to prove the proposed
candidate for executive management or as principal operator is unfit
to serve the capacity. If the manufacturer is in any part basing its
decision to object to the proposed change in the executive management
or principal operator of the dealership on the candidate 's alleged poor
past performance, and reasonably sufficient performance data
Senate Bill 295 Session Law 2025-41 Page 7
requested by the manufacturer has been supplied to the manufacturer
by the proposed candidate, the manufacturer shall have the burden of
proving that, during the immediately preceding three calendar-year
period, the average overall sales performance or average overall
customer satisfaction performance of all of the dealerships owned or
operated by the candidate, when considering all line -makes of new
motor vehicles sold by the franchised dealerships owned or operated
by the candidate, was below the State or national average, whichever
one of these standards is customarily employed by the manufacturer,
as measured by each such line -make. In its notice of objection, the
manufacturer is required to cite and provide the specific data and
calculations upon which the manufacturer bases its contention that
during the immediately preceding three calendar-year period, the
candidate's overall sales performance or average overall customer
satisfaction performance of all of the dealerships owned or operated
by the candidate, when considering all line -makes of new motor
vehicles sold by the franchised dealerships owned or operat ed by the
candidate, was below the State or national average, whichever one of
these standards is customarily employed by the manufacturer, as
measured by each such line -make. For purposes of this subdivision,
the sales performance or customer satisfaction performance of a
dealership that has been owned by the candidate for less than two years
prior to the date the existing dealer notified the manufacturer or
distributor of the proposed change in the executive management or
principal operator of the dealership may not be used in whole or in part
as a basis for rejecting the candidate's application.
…."
CLARIFY DEFINITION OF MOTOR VEHICLE DEALER
SECTION 4. G.S. 20-286(11) reads as rewritten:
"(11) Motor vehicle dealer or dealer. –
a. A person who does any of the following:
…
6. For commission, money, or other thing of value, or on behalf
of another person sharing ten percent (10%) or more common
ownership, offers new vehicles as part of a subscription
program. This sub -sub-subdivision shall not apply to any
person providing a vehicle subscription or monthly rental
program on or after January 1, 2025.
7. Performs any warranty service or recall work on motor
vehicles; provided, however, that this sub-sub-subdivision
shall not be applicable with respect to a co mmercial fleet
customer that has a designation as such by the manufacturer or
distributor and shall not apply to any remote transmission of
software to a motor vehicle in the course of performing work
under a warranty or pursuant to a recall, that is provided at no
cost to the vehicle owner or lessee.
…."
DEFINITION OF SELLING
SECTION 5. G.S. 20-286 reads as rewritten:
Page 8 Session Law 2025-41 Senate Bill 295
"§ 20-286. Definitions.
The following definitions apply in this Article:
…
(15a) Sell. – The terms "sell," "retail sales," "selling activities," and "lease" and their
cognates are synonymous. Selling includes , but is not limited to, all of the
following:
a. Directly, or indirectly, offering for sale, taking deposits or down
payments, or receiving payment of any kind for the ordering,
reservation, purchase, lease, exchange, or subscription of a motor
vehicle, but does not include receiving payment under a retail
installment contract or lease.
b. Accepting a reservation for a specific m otor vehicle identified by
Vehicle Identification Number or other product identifier from a retail
consumer, provided this definition shall not apply to a manu facturer
or distributor if the reservation is promptly assigned to a franchised
dealer in this State that is authorized to sell the vehicle being reserved.
c. Setting the retail price for the purchase, lease, or exchange of a motor
vehicle.
d. Offering or negotiating terms for the purchase, lease, or finance of a
motor vehicle with a retail consumer , but does not include setting a
manufacturer's or distributor 's suggested retail price or offering of
incentives.
e. Except as provided in G.S. 20-305(53)d.4.II., negotiating directly with
a retail consumer the value of a motor vehicle being traded in as pa rt
of the purchase, lease, exchange, or subscription of a motor vehicle.
f. Offering or negotiating directly with a retail consumer any service
contract, extended warranty, vehicle maintenance contract, guaranteed
asset protection agreement, or any other v ehicle-related products and
services in connection with a sale or lease transaction for a motor
vehicle.
g. Any transaction where the title of a motor vehicle or a used motor
vehicle is transferred to a retail consumer.
h. Any retail lease transaction where a retail c onsumer leases a vehicle
for a period of at least 12 months , but does not include taking
assignments of leases, performing required actions pursuant to such
leases, or receiving payments under a lease agreement.
i. "Selling" does not include a repurchase, replacement, or exchange of
a motor vehicle with a consumer pursuant to Article 15A of this
Chapter.
j. "Selling" does not include setting a manufacturer 's or distributor 's
suggested retail price, advertising generally available finance or lease
terms, or offering generally available customer incentives.
(15a)(15b) Special tool or essential tool. – A tool designed and required by the
manufacturer or distributor and not readily available from another source that
is utilized for the purpose of performing service repairs on a motor vehicle
sold by a manufacturer or distributor to its franchised new motor vehicle
dealers in this State.
…."
CLARIFY DEALERSHIP SUCCESSION
SECTION 6. G.S. 20-305(7) reads as rewritten:
Senate Bill 295 Session Law 2025-41 Page 9
"(7) Notwithstanding the terms of any contract or agreement, to prevent or refuse
to honor the succession to a dealership, including the franchise, by a motor
vehicle dealer's designated successor as provided for under this subsection.
The following applies:
a. Any owner of a new motor vehicle dealership may appoint by will, or
any other written instrument, a designated successor to succeed in the
respective ownership interest or interest as principal operator of the
owner in the new motor vehicle dealership, inc luding the franchise,
upon the retirement, death or incapacity of the owner or principal
operator. In order for succession to the position of principal operator
to occur by operation of law in accordance with sub -subdivision c.
below, the owner's choice of a successor must be approved by the
dealer, in accordance with the dealer's bylaws, if applicable, either
prior or subsequent to the death or incapacity of the existing principal
operator.
…."
UNFINISHED VEHICLES AND COST OF TRAINING REQUIREMENTS
SECTION 7. G.S. 20-305 reads as rewritten:
"§ 20 -305. Coercing dealer to accept commodities not ordered; threatening to cancel
franchise; preventing transfer of ownership; granting additional franchises;
terminating franchises without good cause; preventing family succession.
It shall be unlawful for any manufacturer, factory branch, distributor, or distributor branch,
or any field representative, officer, agent, or any representative whatsoever of any of them:
…
(58) To require a dealer to accept ownership or possession of, or fail to refund and
take back from the dealer within 30 days of the dealer's written request, a new
and unused motor vehicle that either (i) cannot be sold at retail due to the
existence of an open recall that cannot be repaired within 30 days of the later
of the issuance of the recall notice or the dealer taking possession of the
vehicle, missing or inoperable part s or component s that have not been
accounted for on the vehicle invoice , or a stop sale order that cannot be
resolved within the later of 30 days of the issuance of the recall notice or the
dealer taking possession of the vehicle; or (ii) has not actually been delivered
to a dealer within 120 days after the manufacturer or distributor has
represented to the dealer that the vehicle was shipped to the dealer.
(59) To vary the price charged to a dealer for any training, software, equipment, or
tools that is in any way based upon a dealer's compliance with a facility image
program or requirement."
WARRANTY REIMBURSEMENT CLARIFICATIONS
SECTION 8. G.S. 20-305.1 reads as rewritten:
"§ 20-305.1. Automobile dealer warranty and recall obligations.
(a) Each motor vehicle manufacturer, factory branch, distributor or distributor branch,
shall specify in writing to each of its mo tor vehicle dealers licensed in this State the dealer's
obligations for preparation, delivery, pre-sale maintenance, manufacturer -directed component
installation or assembly, warranty, manufacturer -sponsored maintenance programs,
manufacturer extended warr anty, parts exchange programs, and recall service on its products.
The disclosure required under this subsection shall include the schedule of compensation to be
paid the dealers for parts, work, and service in connection with preparation, delivery, warran ty,
and recall service, and the time allowances for the performance of the work and service. In no
Page 10 Session Law 2025-41 Senate Bill 295
event shall the schedule of compensation fail to include reasonable compensation for diagnostic
work, shipping, if required by the manufacturer or distributo r, and for battery disposal or other
disposal charges charges; defective airbag shipping, storage, and disposal, if the airbag is
removed from a consumer's motor vehicle as part of a warranty, manufacturer or distributor good
will, or recall repair; and for all other associated fees that were actually incurred by the dealer,
dealer; and associated administrative requirements as well as repair service and labor. Time
allowances for the performance of preparation, delivery, warranty, and recall work and ser vice
shall be reasonable and adequate for the work to be performed. The compensation paid under this
section shall be reasonable, provided, however, that under Under no circumstances shall the
reasonable compensation under this section for warranty and recall service be in an amount less
than the dealer's current retail labor rate and the amount charged to retail customers for the
manufacturer's or distributor's original parts for nonwarranty work of like kind, provided the
amount is competitive with the retail rates charged for parts and labor by other franchised dealers
of the same line -make located within the dealer's market. If there is no other same line -make
dealer located in the dealer's market or if all other same line-make dealers in the dealer's market
are owned or operated by the same entities or individuals as the dealership being compared, the
retail rates charged for parts and labor by other franchised dealers located in the dealer's market
that sell competing line-make motor vehicles as the dealer may be considered when determining
whether the dealer's rates are competitive.kind.
(a1) The retail rate customarily charged by the dealer for parts and labor may be
established at the election of the dealer by the dealer submitting to the manufacturer or distributor
100 sequential nonwarranty customer -paid service repair orders which contain warranty -like
parts, or 60 consecutive days of nonwarranty customer-paid service repair orders which contain
warranty-like parts, whichever is less, covering repai rs made no more than 180 days before the
submission and declaring the average percentage markup. The average of the parts markup rate
and the average labor rate shall both be presumed to be reasonable, accurate, however, a
manufacturer or distributor may, not later than 30 days after submission, rebut that presumption
by reasonably substantiating that the rate is unfair and unreasonable in light of the retail rates
charged for parts and labor by all other franchis ed motor vehicle dealers located in the dealer's
relevant market area offering the same line -make vehicles. In the event there are no other
franchised dealers offering the same line-make of vehicle in the dealer's relevant market area, the
manufacturer or distributor may compare the dealer's retail rate for parts and labor with the retail
rates charged for parts and labor by other same segment franchised dealers who are selling
competing line-makes of vehicles within the dealer's relevant market area. In th e event there is
also no other same segment franchised dealer who is selling a competing line -make of vehicle
within the dealer's relevant market area, the manufacturer or distributor may then compare the
dealer's retail rate for parts and labor with the r etail rates charged for parts and labor by other
same line -make dealers or same segment franchised dealers who are selling competing
line-makes of vehicles that are loca ted within the relevant market area of the franchised dealer
who is located in closest proximity, measured by straight -line distance, to the dealer, provided
they are not all owned, operated, or controlled by the subject dealer. For the purposes of this
section, the term "relevant market area" shall have the same meaning as set forth in
G.S. 20-286(13b). The retail rate and the average labor rate shall go into effect 30 days following
the manufacturer's approval, but in no event later than 60 days following the declaration, subject
to audit of the submitted repair orders by the manufacturer o r distributor and a rebuttal of the
declared rate as described above. submission is inaccurate. If the declared rate is rebutted, the
manufacturer or distributor shall propose an adjustment of the average percentage markup based
on that rebuttal the correct rate reflected by the submission not later than 30 days after such audit,
but in no event later than 60 days after submission. If the dealer does not agree with the proposed
average percentage markup, the dealer may file a protest with the Commissioner n ot later than
30 days after receipt of that proposal by the manufacturer or distributor. If such a protest is filed,
Senate Bill 295 Session Law 2025-41 Page 11
the Commissioner shall inform the manufacturer or distributor that a timely protest has been filed
and that a hearing will be held on such protest. In any hearing held pursuant to this subsection,
the manufacturer or distributor shall have the burden of proving by a preponderance of the
evidence that the rate declared by the dealer was unreasonable as described in this subsection and
that the proposed adjustment of the average percentage markup is reasonable pursuant to the
provisions of this subsection. inaccurate. If the dealer prevails at a protest hearing, the dealer's
proposed rate, affirmed at the hearing, shall be effective as of 60 days after the date of the dealer's
initial submission of the customer -paid service orders to the manufacturer or distributor. If the
manufacturer or distributor prevails at a protest hearing, the rate proposed by the manufacturer
or distributor, that was affirmed at the hearing, shall be effective beginning 30 days following
issuance of the final order.
(a2) In calculating the retail rate customarily charged by the dealer for parts and labor,
labor under subsection (a1) of this section, the following work shall not be included in the
calculation:
(1) Repairs for manufacturer or distributor special events, specials, coupons, or
other promotional discounts for retail customer repairs.
(2) Parts sold at wholesale or at reduced or specially negotiated rates for insurance
repairs.
(3) Engine and transmission assemblies.
(4) Routine maintenance, including fluids, filters, alignments, flushes, oil
changes, belts, and brake drums/rotors and shoes/pads not provided in the
course of repairs.
(5) Nuts, bolts, fasteners , and similar items that do not have an individual part
number.
(6) Tires and vehicle alignments.
(7) Vehicle reconditioning.
(8) Batteries and light bulbs.
…
(a5) A manufacturer or distributor shall not unreasonably deny a written request submitted
by a d ealer for modification of a manufacturer 's or distributor 's uniform time allowance for a
specific warranty repair, or a request submitted by a dealer for an additional time allowance for
either diagnostic or repair work on a specific vehicle covered under warranty, provided the
request includes any information and documentation reasonably required by the manufacturer or
distributor to assess the merits of the dealer's request.
(b) Notwithstanding the terms of any franchise agreement, it is unlawful for any motor
vehicle manufacturer, factory branch, distributor, or distributor branch to fail to perform any of
its warranty or recall obligations with respect to a motor vehicle, to fail to fully compensate its
motor vehicle dealers licensed in this State for a qualifying used motor vehicle pursuant to
subsections (i) and (j) of this section or warranty and recall parts other than parts used to repair
the living facilities of recreational vehicles, including motor homes, travel trailers, fifth -wheel
trailers, camping trailers, and truck campers as defined in G.S. 20-4.01(32b), at the prevailing
retail rate according to the factors in subsection (a) of this section, or, in service in accordance
with the schedule of compensation provided the dealer pursuant to subsection (a) of this section,
or to otherwise recover all or any portion of its costs for compensating its motor vehicle dealers
licensed in this State for warranty or recall parts and service or for payments for a qualifying
used motor vehicle pursuant to su bsections (i) and (j) of this section either by reduction in the
amount due to the dealer, or by separate charge, surcharge, or other imposition, and to fail to
indemnify and hold harmless its franchised dealers licensed in this State against any judgment
for damages or settlements agreed to by the manufacturer, including, but not limited to, court
costs and reasonable attorneys' fees of the motor vehicle dealer, arising out of complaints, claims
or lawsuits including, but not limited to, strict liability, negligence, misrepresentation, express or
Page 12 Session Law 2025-41 Senate Bill 295
implied warranty, or recision or revocation of acceptance of the sale of a motor vehicle as defined
in G.S. 25-2-608, to the extent that the judgment or settlement relates to the alleged defective or
negligent manufacture, assembly or design of new motor vehicles, parts or accessories or other
functions by the manufacturer, factory branch, distributor or distributor branch, beyond the
control of the dealer. Any audit, other than an audit conducted for cause, for war ranty or recall
parts or service compensation, or compensation for a qualifying used motor vehicle in accordance
with subsections (i) and (j) of this section may only be conducted one time within any 12-month
period and shall only be for the 12-month period immediately following the date of the payment
of the claim by the manufacturer, factory branch, distributor, or distributor branch. Any audit,
other than an audit conducted for cause, for sales incentives, service incentives, rebates, or other
forms of incentive compensation may only be conducted one time within any 12 -month period
and shall only be for the 12-month period immediately following the date of the payment of the
claim by the manufacturer, factory branch, distributor, or distributor branch pur suant to a sales
incentives program, service incentives program, rebate program, or other form of incentive
compensation program. Provided, however, these limitations shall not be effective in the case of
fraudulent claims. For purposes of this subsection, the term "audit conducted for cause" is defined
as an audit based on any of the following: (i) statistical evidence that the dealer's claims are
unreasonably high in comparison to other dealers similarly situated or the dealer's claim history,
(ii) that t he dealer's claims submissions violate reasonable claims documentation or other
requirements of the applicable manufacturer, factory branch, distributor, or distributor branch,
(iii) a follow up to an earlier audit in which the dealer was notified of a cla im documentation
procedure violation that occurred within the prior 12 -month period, provided the audit and any
chargeback are in compliance with subdivision (b1) or (b2) of this section and are limited in
scope to just the specific violation determined pr eviously, or (iv) (ii) reasonable evidence of
malfeasance or fraud. In the event a manufacturer, factory branch, distributor, or distributor
branch elects to perform an audit conducted for cause, the manufacturer, factory branch,
distributor, or distributor branch, simultaneously with providing the affected dealer with written
notice of the audit, shall further be required to explain in detail in the notice the data or other
foundation upon which the cause is based.
…."
LOANER VEHICLE COST REIMBURSEMENT
SECTION 9. G.S. 20-305(33) reads as rewritten:
"(33) To fail to reimburse a dealer located in this State in full for the actual cost,
including applicable taxes and third-party fees, of providing a loaner or rental
vehicle to any customer who is having a ve hicle serviced at the dealership if
the provision of such a loaner or rental vehicle is required or approved by the
manufacturer. It is unlawful for a manufacturer to fail to reimburse the dealer
in full as provided above (i) whether or not the dealer provides the customer
with a model vehicle similar to the vehicle the customer brought in for service,
in the event the dealer does not have a similar model loaner or rental vehicle
available, or (ii) if the provision of a rental or loaner vehicle to a customer is
required or approved by the manufacturer or distributor and further provided
that all or any portion of the time the dealer has provided the customer with a
loaner or rental vehicle is due to the unavailability of one or more parts sold
or distributed by the manufacturer or through a supplier designated or
approved by the manufacturer.manufacturer, or whethe r or not the
manufacturer has its own loaner program in which the dealer has elected not
to participate. In the event that a manufacturer has its own loaner vehicle
program in which a dealer has elected not to participate, the manufacturer may
limit the de aler's daily reimbursement amount to the same daily
Senate Bill 295 Session Law 2025-41 Page 13
reimbursement amount as the manufacturer would have paid the dealer for a
vehicle of similar size and class provided by the dealer under the
manufacturer's loaner program, plus applicable taxes and third-party fees. The
manufacturer shall allow a dealer to submit a claim for rental vehicle
reimbursement as required pursuant to this subdivision, in 30-day increments,
prior to the end of the rental vehicle period if the repair for which the rental
vehicle is associated is open due to a delay in parts or repair information from
the manufacturer, factory branch, distributor, or distributor branch. A
manufacturer may establish po licies and procedures that are consistent with
the provisions of this subdivision fo r dealers to submit claims for loaner
vehicle cost reimbursement."
SEVERABILITY CLAUSE
SECTION 10. If any provision of this act or its application is held invalid, the
invalidity does not affect other provisions or applications of this act that can be gi ven effect
without the invalid provisions or application and, to this end, the provisions of this act are
severable.
EFFECTIVE DATE
SECTION 11. This act is effective when it becomes law and applies to all current
and future franchises and other agreement s in existence between any new motor vehicle dealer
located in this State and a manufacturer or distributor as of the effective date of this act.
In the General Assembly read three times and ratified this the 24th day of June, 2025.
s/ Rachel Hunt
President of the Senate
s/ Destin Hall
Speaker of the House of Representatives
s/ Josh Stein
Governor
Approved 10:17 a.m. this 1st day of July, 2025