Wholesale disclosure

When a registered Ontario dealer sells or leases a vehicle to another registered dealer, the transaction is governed by the Code of Ethics regulation made under the Motor Vehicle Dealers Act, 2002. The single rule that drives this category is section 5 of O. Reg. 332/08, the Code of Ethics. It sets out the list of facts the selling dealer must put in the wholesale contract. The list is shorter than the retail disclosure list under O. Reg. 333/08, but it is not optional, and it binds every class of dealer that ever moves a vehicle to another dealer: general dealers wholesaling aged inventory, wholesalers selling at auction, brokers placing trades, and lease finance dealers selling off-lease units.

The point of wholesale disclosure is simple. The buying dealer needs the same facts the selling dealer would have to give a retail customer, because the buying dealer will eventually have to give those facts to a retail customer. If a fact does not travel down the chain, the consumer at the end of the chain cannot make an informed decision, and somebody (usually the retail dealer) ends up paying for a rescission they could not see coming.

What this category covers

This category is about contracts between two registered motor vehicle dealers for the sale or lease of a vehicle. It is not about wholesale auctions as such (auction conduct sits elsewhere), and it is not about retail material-fact disclosure (covered separately under the disclosures category). The territory here is the written wholesale contract, the 22 paragraphs in section 5 of O. Reg. 332/08, and the practical question of how a dealer collects the information needed to fill that contract in.

Key rules to remember

The rule applies only to used motor vehicles, with one wrinkle

Most of the section 5 paragraphs apply only when the vehicle is a used motor vehicle. “Used motor vehicle” is defined in section 1 of the regulation: a vehicle for which a Highway Traffic Act permit has been issued, or one that has been used in a way that would have required a permit. A factory-fresh new car moving from a manufacturer to a registered dealer is not a used motor vehicle and the odometer or prior-use paragraphs do not apply. Make, model, model year, and trim level (paragraph 14) apply to every wholesale contract regardless.

Distance must be disclosed, and uncertainty must be disclosed too

Paragraphs 1, 2, and 3 of section 5 stack as a ladder. If the selling dealer knows the total distance the vehicle has been driven, they record it. If they only know the reading on a past date, they record that reading and date and add a statement that the true total is believed to be higher. If they cannot establish either, they record that the total distance is unknown and may be substantially higher than the odometer reading. Paragraph 4 adds that any broken, replaced, rolled-back, or in-miles odometer must be flagged on its own.

Previous use, history, and condition each carry mandatory triggers

Section 5 then lists prior-use facts (police, emergency, taxi, limousine, daily-rental fleet), damage history (fire, flood, structural repair, two or more replaced adjacent non-bumper panels, total-loss declaration, Highway Traffic Act classification as irreparable, salvage, or rebuilt, theft recovery), warranty status (manufacturer warranty cancelled), and condition items (non-functional anti-lock braking system, missing or non-functional airbags, badge inconsistent with model, vehicle materially different from original or advertised production specifications). Damage from a single incident with repair costs over $3,000 must be disclosed; if the dealer knows the actual total, they must state it. Out-of-Ontario history must be disclosed unless the vehicle has been continuously permitted in Ontario for at least seven years.

The catch-all paragraph still applies dealer-to-dealer

Paragraph 22 is the wholesale catch-all: any other fact about the structural or mechanical quality or performance of the vehicle that a reasonable purchaser or lessee would care about. The Code of Ethics deliberately mirrors the retail catch-all here. A selling dealer cannot stay silent on a known engine fault, a known frame issue, or a stuck rebuilt-after-flood title just because the buyer is also a dealer.

Common mistakes

• Treating wholesale as a “no disclosure needed” zone. A surprising number of complaints reach OMVIC after a retail buyer rescinds and the retail dealer discovers the wholesaler never disclosed the prior taxi use, the structural repair, or the fire-damage history.
• Putting the disclosures on a window sticker, an auction run sheet, or a verbal note instead of in the contract itself. Section 5 requires the information to be in the contract.
• Recording an odometer reading without flagging that the dealer cannot confirm the total distance. Paragraphs 2 and 3 require the explicit “believed to be higher” or “unknown and may be substantially higher” statement; a bare number is not compliance.
• Forgetting that the $3,000 trigger is per incident, not lifetime cumulative. Two unrelated $2,000 repairs do not aggregate into a disclosure obligation.
• Skipping the out-of-province paragraph because the vehicle has been in Ontario “a while”. The seven-year continuous-permit rule is precise; if the seven years is not there, the prior jurisdiction must be stated.
• Salespeople collecting trade-in information that never gets passed to the staff who write the wholesale contract, breaking the chain of disclosure between the trade-in desk and the auction lane.

How OMVIC enforces this

OMVIC inspectors review wholesale contracts during routine inspections of dealer records, and OMVIC investigators pull wholesale contracts when a downstream retail buyer files a complaint. A pattern is common: a retail consumer rescinds against the selling retail dealer because of an undisclosed material fact, and the retail dealer in turn shows OMVIC that the wholesale contract from the upstream dealer was silent on the same fact. OMVIC can refer a Code of Ethics breach to its Discipline Committee under section 17 of the Motor Vehicle Dealers Act, 2002. Panels can order educational courses, fines up to $25,000, and costs, and a registrant can appeal to the Appeals Committee within 30 days under section 19 of the regulation. Serious or repeated breaches can lead the Registrar to propose to refuse, suspend, or revoke registration, with appeal rights to the Licence Appeal Tribunal.

Where to learn more

The complete text of the wholesale disclosure rule sits in section 5 of O. Reg. 332/08, the Code of Ethics regulation. Read it alongside the retail material-fact rule in O. Reg. 333/08, section 42, so the differences are clear in your head before the certification exam. The DealerPrep iPhone app carries the full question pool for this category, including paragraph-by-paragraph drills on the 22 listed disclosures.