Is There a Lemon Law for Used Cars?

by Harry Bradley on June 18, 2014

used car lemon lawYes, used car lemon laws exist! Let’s get that out of the way up front. The misinformation on this issue is commonplace. Actually, rampant is more accurate, but used car owners have legal protections, too. Buyers are often misguided and falsely advised that no lemon law exists for them, but this is patently false. The new vehicle lemon law is only one of many statutes and regulations in place to protect consumers – used vehicle lemon laws are just as effective but not as well known as their new vehicle cousins. Before you buy another car, read below to learn what laws are in place to help you negotiate your best protections before the sale, and to help if you experience trouble afterward. Continue below for the used car lemon law breakdown.

Used Car Lemon Law Breakdown

Used car sales are poised to reach all time highs in 2014 according to the Manheim 2014 Used Car Market Report. Analysis of last year’s sales data shows that used vehicle sales outpaced new by almost 3-to-1 with total used vehicle sales of 42 million in 2013. Franchised new vehicle dealers are also taking advantage of high used car demand by selling nearly the same number of used vehicles as new, 15.6 million of each, with used vehicles bringing twice the profit margin of new vehicle sales. The double-profit margin and triple-volume sales provide much incentive for franchised new and independent used vehicle dealers to continue concentrating on the used car marketplace in 2014.

As this trend continues, 2014 will again be a banner year for used vehicle sales and, in conjunction, give rise to a record number of questions about purchaser’s rights. The information in this article is meant to clear the air and give used car buyers real, useable information on the protections available when purchasing on the used or pre-owned market. So let me say it again, there are lemon laws for used cars – you just need to know where to look.

For more help or an attorney referral in your area, please Contact Us!

Contact Us

The Warranty is the Key

All lemon laws, new or used, have a manufacturer or seller’s warranty as its foundational legal basis. In this regard used car lemon laws and warranties are no different. However, used car warranties vary considerably in terms, much more so than new product warranties. Some used car warranties are full or limited, parts or labor, 100% or 50%, or cover only certain parts and exclude coverage for others. These variations, limitations and exclusions can be very confusing, even for those who deal with warranty issues daily. Even for many experienced legal professionals deciphering warranty term hieroglyphics is daunting. To aid in understanding I have categorized a typical consumer’s rights by the type of warranty received and the protections typically provided by each as opposed to attempting to explain each warranty term (which could take volumes). The warranty scenarios listed below are subjectively arranged from best coverage to least and include the following:

Original Manufacturer’s Bumper-to-Bumper Warranty
Certified Pre-Owned Warranty
Manufacturer’s Powertrain Warranty
Dealer’s Full Warranty
Dealer’s Drivetrain or 50/50 Warranty
Service Contract or Extended Warranty
AS-IS (No Warranty)

Each scenario is described below, but before continuing, a note must be made about the most important document generated in a used car purchase, the Federal Trade Commission’s Buyer’s Guide. A dealer must display this document “prominently and conspicuously” on the vehicle before it is displayed for sale and advises the purchaser immediately what warranties come with the vehicle. You must understand what this document does, and you must have a copy of this document in hand before discussing the sale further or risk losing lemon law options afterward when you can least afford it. You just started making payments on a new car note after all.

The FTC Buyer’s Guide

The FTC’s Used Car Rule requires this form on every used vehicle for sale and it controls over any conflicting terms in the rest of the purchase paperwork. Simply, it tells you quickly and plainly if you have a warranty and the likelihood of lemon law coverage after the sale, and nothing else trumps it.

FTC Buyer's GuideThe first line of the form succinctly states its importance: “IMPORTANT: Spoken promises are difficult to enforce. Ask the dealer to put all promises in writing. Keep this form.” Without it, or if it’s marked “AS-IS” you will have a difficult time trying to get the dealer to fix anything.

If the check box is marked for “warranty,” the warranty description will be on the lines at the bottom and you will have some form of lemon law protection after the sale. No other fine print can take away the warranty promised on this form so make sure you get a copy. The dealer “may not make any statements, oral or written, or take other actions which alter or contradict the disclosures required” by this form. 16 CFR 455.4.

If you received a warranty at the time of sale, you will fall into one of the following categories of used car lemon law protection.

Remaining Original Manufacturer’s Warranty

This is the best place to be! Almost all bumper-to-bumper warranties are transferrable throughout the duration of coverage. Whether you’re the second or the fifth owner, you’re fully covered until the clock runs on the factory warranty from the original in-service date. The car must start, stop, steer, drive, and exhibit normal operation in every way. Normal maintenance is still your responsibility so if you didn’t see those bald tires when you bought it, just kick yourself and buy some new tires. If that check engine light came on or it makes a weird ticking noise, take it to any authorized dealer (not necessarily the selling dealer) and demand repairs. If the dealer can’t repair within a reasonable amount of time, you can file a breach of warranty claim under the federal and/or state Warranty Act. The terms for this warranty will be found in the warranty booklet and on the FTC Buyer’s Guide.

Summary: Manufacturer is responsible for all vehicle defects until warranty expiration.

Certified Pre-Owned Warranty

According to the Manheim 2014 Used Car Market Report franchise dealers sold over 2 million certified pre-owned vehicles in 2013, more than in any previous year. Certified vehicles are inspected by an authorized dealer and often receive some reconditioning per manufacturer’s specifications making them ideal for those who want an almost new car without the new car depreciation. They are also ideal in a lemon law context because certification provides substantial additional manufacturer’s warranty coverage, sometimes to 100,000 miles or more, on top of the original manufacturer’s warranty. Because the manufacturer is giving the warranty, your protection is the same as under the original warranty. Any failure to cure a defect within a reasonable amount of time allows you to file a breach of warranty claim under the federal and/or state Warranty Act. The terms for this warranty will be found in the certified warranty booklet and on the FTC Buyer’s Guide.

Summary: Manufacturer is responsible for all vehicle defects until certified warranty expiration.

Manufacturer’s Powertrain Warranty

Many new vehicles are sold with a warranty supplemental to the bumper-to-bumper called a powertrain or drivetrain warranty. It lasts longer than the bumper-to-bumper but is limited to only the components of the engine, transmission, and axles. Also, many do not transfer to a subsequent owner. Check the owner’s manual before you buy to confirm that the powertain transfers to you. If it does, and you have a problem with a powertrain component, the manufacturer is responsible just as in the case of original warranty coverage. The terms for this warranty will be found in the warranty booklet and on the FTC Buyer’s Guide.

Summary: Manufacturer is responsible for engine, transmission, and axle defects until warranty expiration for any transferable warranty.

Dealer’s Full Warranty

carlotThis is where the dealer takes on full responsibility for any mechanical problems and the manufacturer is out of the picture. The terms for this warranty will be found only on the FTC Buyer’s Guide as the manufacturer’s warranty has completely expired. Otherwise, coverage is similar to the manufacturer’s warranty in that the vehicle must be free of defects and must start, stop, steer, drive, and exhibit normal operation in every way. If you have a problem you are limited to repairs only at the selling dealer but that dealer must correct them within a reasonable amount of time. If the selling dealer fails to do so you can file a breach of warranty claim under the federal and/or state Warranty Act.

Summary: Selling dealer is responsible for all vehicle defects until warranty expiration.

Dealer’s Drivetrain or 50/50 Warranty

The selling dealer is usually not willing to carry the full responsibility for the vehicle’s mechanical condition following a sale, but is often willing to compromise and offer a partial warranty covering either limited components, splitting the cost, or both. The terms for this warranty will be found only on the FTC Buyer’s Guide and will specifically state “The dealer will pay X% of the labor and X% of the parts for the covered systems that fail during the warranty period.” The covered components will be listed at the bottom of the first page of the FTC Buyer’s Guide under “Systems Covered.” The dealer must repair any covered components with cost contribution from the owner within a reasonable amount of time or you can file a breach of warranty claim under the federal and/or state Warranty Act.

Summary: Selling dealer is responsible for covered vehicle defects until warranty expiration. Owner is responsible for % of repair costs stated on the FTC Buyer’s Guide for each repair.

Service Contract or Extended Warranty

Extended warranties are called warranties but act more like repair contracts or service agreements. Car repair insurance is a good way to think of it. These warranties are administered by a remote third party not affiliated with the selling dealer and are most common when all other warranties have expired. The FTC Buyer’s Guide will be marked AS-IS and the dealer will have no further responsibility. The sole benefit you have under an extended warranty is the cost of repairs to any systems covered by the terms of the warranty. If the covered system fails, the extended warranty administrator must pay for that repair at a shop authorized by them to perform the repair. There is no time requirement to complete repairs and no breach occurs for repetitive repair attempts so no claim is available for lengthy stays in the shop. However, this occurs either at no cost or after a minimal deductible so extended warranties are greatly beneficial in the event of an expensive repair. If the warranty administrator refuses to pay the cost of repairs for a covered system within the terms of the warranty you can file a breach of warranty claim under the federal and/or state Warranty Act.

Summary: Third-party warranty administrator is responsible only for the cost of repairs for covered vehicle systems until warranty expiration. Neither the dealer nor the manufacturer has any repair responsibility.

AS-IS (No Warranty)

If the dealer provided no warranty at the time of sale and the FTC Buyer’s Guide is marked AS-IS, your options are severely limited. This is also known as a full disclaimer of warranties relieving the dealer from any further obligation regarding mechanical condition. If you have problems you are left mostly with diplomacy. You should contact the selling dealer and attempt to negotiate a repair at no-cost or with a cost split. The dealer will almost never accept the vehicle’s return and you will likely have an expensive out-of-pocket repair. Take this into consideration when negotiating the purchase of a vehicle marked AS-IS – once it’s yours, it’s yours. The sale price offered for that AS-IS used car may seem too good to pass up, but in reality when has that ever actually happened.

Please note, most states allow dealers to completely disclaim all warranties by marking AS-IS on the FTC Buyer’s Guide, but a rare few do not including Connecticut, Massachusetts, Minnesota, New Jersey, New Mexico and New York. In these states you have a minimum of protections after the sale but act fast as they expire quickly.

Summary: Used car lemon laws generally do not apply for an AS-IS sale.

Additional Information

Further information and additional reading can also be found here:

Used Motor Vehicle Trade Regulation Rule 16 CFR Part 455
FTC Dealer Guide to the Used Car Rule

Time to File a Lemon Law Claim

If you have a warranty and the dealer cannot fix your vehicle, you should explore the possibility of filing a claim under the lemon law. The lemon law entitles you to your own legal counsel at the manufacturer’s expense so there’s no reason not to make a call and find someone to help. Most consumer attorneys provide the initial consultation at no-cost. Even if you don’t have a case yet, you’re only out the phone call and will have gained very useful information for the future.

For more help or an attorney referral in your area, please Contact Us!

Contact Us