Dealerships and their Legal Obligations to the Consumer

March 15, 1962, John F Kennedy revolutionized consumer rights. The president called on Congress to legislate four fundamental consumer rights. The day has been celebrated as World Consumer Rights Day.

• The right to be informed and protected against fraudulent, deceitful, and misleading information in advertising and labeling. The consumer must be given the correct information to make an informed decision.
• Right to safety and protection against goods that are hazardous to health.
• The right to be heard. Consumer interests must receive full and sympathetic consideration in formulating Government policies.
• The right to choose, wherever possible, access to products and services at competitive and fair prices.

What Information a Dealer Must Disclose on the Vehicle History Report

Several industries, including automotive, real estate, and healthcare, are continually in the consumer crosshairs for deceptive or unethical business dealings. Automotive dealership personnel must always tread lightly and honestly when dealing with consumers wanting to purchase a car or truck.

Legal obligations vary by state; however, fundamental principles apply across most jurisdictions.

Automakers and their dealerships should always create an air of transparency and trust when making a sale. Management and sales personnel should continuously adapt to the changing attitudes of the modern car buyer. 91% of the car-buying public say trust is the deciding factor on which dealership to purchase from.

Consumers no longer want the “so-called games” between buyers and dealership personnel. Offering buyers swift and correct information usually includes a vehicle history report, which can mean success or failure for a dealership.

Dealerships must disclose adverse conditions that may affect the value of the vehicle they are selling.

• One of the more significant problems with a vehicle’s history report is it may uncover a salvage title. This type of title indicates the vehicle has been damaged past the point that repairing the damage would exceed its value before the accident. Insurance companies are responsible for declaring a vehicle as a total loss. Even though damaged vehicles can be repaired and made roadworthy, the title will remain a salvage designation. Potential buyers must exercise caution if considering a vehicle with a salvage title. 1) Always have a thorough inspection performed by a quality mechanic. 2) determine the extent of the damage that led to the salvage title. 3) safety must not be ignored; determine if there are any underlying structural issues. 4) switch to a vehicle with a good title.
• Vehicle reports disclose any prior accident history that impacts structural or safety issues affecting the resale value. Accidents as severe as frame damage or as light as a fender-bender will be reported to the VIN check service, depending on the situation.
• Flood-damaged cars and trucks can be repaired to roadworthy status; however, several underlying issues will affect drivability. Flood-damaged vehicles or those completely submerged in water will likely have long-term electrical, interior, and engine problems.

Compliance and Consequences

Dealerships must understand and comply with state and federal laws regarding disclosing information uncovered by a vehicle history report. Before running off to the local dealer and making an offer on their dream car, consumers must know the laws protecting their buying decisions.

Along with accessing quality VIN check services such as GoodCar, consumers can refer to the National Motor Vehicle Title Information System (NMVTIS). The NMVTIS is a division of the Department of Justice that gives the car-buying public another means of checking a vehicle’s history.

The NMVTIS website provides links to practitioners for both commercial and private consumers. There are links for commercial consumers only, along with a “used car buying tips” page and checklist. GoodCar is an approved NMVTIS data provider

Used Car Buyer’s Guide

A Buyer’s Guide window sticker must be attached to every used vehicle a dealership is offering for sale. The Guide is a requirement of the Federal Trade Commission. Information such as an existing warranty and a percentage of repair costs the dealer will pay must be on the Guide.

Dealerships who prefer to be sneaky may face penalties and fines, including revocation of their dealer license. Potential civil liabilities may be open to the consumer for dealership fraud or misrepresentation.

Lemon Law

Buyers who purchase a brand new vehicle and sometimes a used car or truck, and the vehicle turns out to be defective or a lemon; the buyer has specific rights under state and federal regulations.

Federal Regulations

Passed in 1975, the Magnuson-Moss Warranty Act is the federal lemon law governing consumer product warranties. Consumer rights are protected by detailing the fine print of consumer product warranties.

When a warranty is written up, the document must state whether the warranty is full or limited. The document, under federal law, must be clear, concise, and easily readable. The act prohibits any company that provides a warranty from disclaiming or modifying the document. The implied warranty guarantees the product works as stated.

If a dealer fails to live up to the warranty terms, the consumer can sue for breach of warranty.

State Lemon Laws

Each state has specific laws regarding defective products which are covered under warranty. There are common elements to each state law.

• A substantial product defect affecting the value or safety must be covered under warranty.
• Typically, lemon laws cover new vehicles; however, some used or leased vehicles are covered.
• Manufacturers must be given a reasonable amount of attempts to repair the vehicle. The number of attempts varies by state, but three or four is usually the maximum. Consumers must notify the manufacturer in writing and give them one final attempt at repair.

Penalties

Each state gives its interpretation of the Lemon law and any associated penalties. If a new vehicle is deemed a lemon or badly defective, manufacturers must refund the price or replace it with a comparable product.

Consumers who come out on top in a lemon law case will have attorney’s fees paid by the manufacturer. A few states allow for civil penalties on top of a product refund or replacement. Civil penalties can be a multiple of the actual damages or product defects.