8 Used Car Lot Insurance Risks

Business owners face risks when operating their companies, and used car lot owners are no exception. There are several unique risks that these owners may face that can have a significant impact on their business’s reputation, finances, and long-term success.

Let’s take a closer look at eight key risk factors that you may face owning a used car lot to understand better how they may threaten your success.

Lawsuits From Customers

One of the top risks used car lots face is the threat of lawsuits and other legal action taken by individuals who purchase a vehicle from the lot. Suppose a buyer isn’t happy with their purchase and cannot get a full refund or anything else they want in recompense from your business. In that case, their next step is often to bring a lawsuit against the dealership for selling them a faulty vehicle.

Customers may also bring suits against a used car lot for other reasons. For example, if they believe they didn’t receive the correct value of the vehicle for what they paid, buyers may wish to challenge their transaction’s validity or legality. Alternatively, lawsuits may also be brought against your lot if individuals are injured on your property in almost any manner, including slip-and-falls, attacks from guard dogs, or other injuries sustained on your property.

Property Risk

There are many risks associated with owning a used car lot, and each one can significantly impact your lot’s property risk. 

For example, if you own a simple asphalted lot with a single office building, your risk factor is significantly lower than a competitor with a garage on their lot. This is because operational garages have additional risks, including trip hazards, welding or chemical-related fires, or expensive equipment damage.

Vehicular Accidents and Injuries

Another risk that used car lots face far more than other business types is vehicular accident and injury. Employees, buyers, and other individuals have a significantly higher risk of getting into an accident or injuring themselves in an automobile incident at your used car lot than they may face when shoe shopping simply because they’re around a proportionally larger amount of vehicles.

And while there may be risks and incidents that occur with the cars while parked on your lot, there is also the risk of accident or injury if an individual chooses to test-drive the vehicle off the property. This can result in multi-car accidents that may result in legal and medical bills you will have to pay.

Garage Keeper’s Risk

If you offer services where you store vehicles or property that is not part of your lot’s inventory, you will also face garage keeper’s risk. This risk exists because while your insurance coverage will often cover your property if it’s damaged, it may not protect third-party property that is left on your lot. If you allow individuals to store their property on your land, you need to consider taking out additional insurance options to ensure you’re fully protected.


Another great risk that used car lots face is the risk of theft. Used cars are valuable on the black market, with Ford and Chevy’s full-sized trucks most likely to be stolen. So while any vehicle may risk being stolen, high-value targets like these may put you in greater danger of theft.

You can help both mitigate this risk and potentially lower your theft-related insurance rates by investing in a good security system for your property. Consider consulting with professionals and investing in alarms and video surveillance systems to help prevent theft or recover stolen property.


One of the more complex risks to catch is fraud–specifically employee-related fraud. Oftentimes, individuals don’t catch fraudulent activity the first few times it’s committed against them, so you may lose a significant amount of property before you’re aware of the problem. 

And while thoroughly vetting your staff can help you avoid some issues, there is no way to know everything that goes on in your employees’ lives that may cause them to commit fraud. But by having an effective fraud insurance policy in place, you can mitigate the damages you face if you discover that you are being cheated out of profits, property, or anything else relating to your business.

Transaction Issues

Transactions always come with a certain amount of risk–especially the more often they’re conducted. If you manage a high number of daily transactions, you may need to be concerned about transactional fraud issues. Electronic fund transfers, unlike other payment methods, are not reversible. 

Once the money is paid or moved, it cannot be undone. This means that you need to keep a close eye on all of your electronic transactions not only to protect your business but also to protect your customers and reputation.

Additionally, large electronic transfers–like those that may be made to cover the cost of a used car–may be flagged by the government. This is because they are concerned about larger transfers being part of a money laundering scheme or funding acts of terror.

Cyber Attacks

Whenever customers buy a vehicle from you, there is typically a digital record of the sale. This data may contain personal identities, financial data, and other information that can put your customers at risk of identity theft or fraud, not to mention the chances of your business’ data being accessible by cyber attackers.

Cyber and ransomware attacks are increasing, and they can cost businesses like used car lots tens of thousands of dollars that you may be fully responsible for paying if you don’t have the right insurance coverage in place.

Key Takeaways

Running used car lots can be risky, but fortunately, having the right insurance options in place can go a long way in reducing your liability and helping cover costs relating to accidents and lawsuits so you’re not stuck paying everything out of pocket.

For more information on the best insurance options for your used car lot, contact our top-tier team of insurance agents today!