Used-Car Lemon Laws

Lemon laws protect new car buyers in every state in the nation, but it's far more common for used-car buyers to get stuck with an unreliable vehicle, or to incur repair bills that cost more than the car. For such unfortunate consumers, it often goes downhill from there.

Owners of lemons, as these cars are often called, must still make car payments while their vehicle sits idle. One-sided arbitration clauses — built into practically every dealer's vehicle sales contract — work to keep many used-car buyers from taking a case to court. Finally, a buyer may have to prove that the vehicle's problems existed prior to the sale in order to get some compensation. These factors plus the subject's complexity leave many consumers in the lurch.

"Many of these cars are dangerous to drive," says John Van Alst, used-car fraud expert with the National Consumer Law Center. "Even if not, when a car becomes inoperable, it becomes a liability instead of an asset."

Although it's not always the case, some of these used lemons are sold fraudulently, such as when a dealer fails to disclose the vehicle's history, misrepresents the vehicle title or tampers with the odometer. Often, these dealers prey on the most vulnerable, low-income segment of the population.

Used-Car Lemon Laws

The frequency and severity of consumers' used-car problems has led some state legislatures to pass new laws. Currently, though, only six states — Connecticut, Massachusetts, Minnesota, New Jersey, New Mexico and New York — have used-car lemon laws on the books. The laws provide a statutory used-car warranty, often based upon the age or mileage of the vehicle. If the vehicle exhibits problems during the warranty period, the dealer gets a chance to repair them. If those fixes don't work after several tries, the dealer usually must either replace the car or refund the buyer's money.

At least seven states have some other form of used-car buyers' rights, requiring used-car warranties or setting minimum standards for the sale of used cars: They are Arizona, Connecticut, Illinois, Maine, Nevada, New Mexico and Pennsylvania. Still other states, including North Carolina, have an unfair and deceptive practices statute that buyers can invoke. But only those states with true used-car lemon laws require the dealer to provide a replacement or refund for the car.

Beginning in 2013, people who buy their used cars at "buy-here, pay-here" car dealerships in California get an extra measure of used-car lemon protection. (Buy-here, pay-here dealerships are a particular kind of used-car business, specializing in older, high-mileage vehicles and catering to consumers who can't qualify for conventional car loans.)

A new California law requires buy-here, pay-here dealerships to issue 30-day/1,000-mile warranties for the used vehicles they lease or sell. The existence of that warranty also gives buy-here, pay-here customers additional protection under the federal lemon law, the Magnuson-Moss Warranty Act. More about that later.

The Sorry State of Used-Car Regulations

Van Alst says that most states aren't very effective at protecting used-car buyers from the myriad ways they can be swindled. "Most existing used-car lemon laws are so limited in scope — the number of days the car is covered and the allowable mileage — that the consumer may not experience the problem or won't have a chance to act on the problem in that time period," he said.

For example, Arizona law covers a used car only if a major component breaks within 15 days or 500 miles of its purchase — whichever comes first. For new cars, though, those terms extend to two years or 24,000 miles.

By contrast, many European consumers have stronger protections. In France, for example, a car buyer may cancel the transaction up to seven days after the sale. And a 1999 European Union directive allows consumers to seek redress for any problem that makes a vehicle unfit to drive for a full two years after the purchase.

As is always the case when buying a car, the only way to fully protect yourself is to come armed with information. Many consumer advocacy sites, such as The Center for Auto Safety, discuss new car lemon laws in detail, but obtaining information on used-car laws is trickier. We found Car Lemon (an attorney referral site) and Autopedia's Lemon Law Information Page to have the broadest information on states' used-vehicle lemon laws.

What if Your State Doesn't Have a Used-Car Lemon Law?

For consumers who don't live in a state with a used-car lemon law, or whose state laws don't cover their individual situations, there are federal laws that may help:

• The Uniform Commercial Code (UCC): Under the UCC, a used-car sale automatically includes an implied warranty that the car is fit for transportation. However, used-car dealers may deny (or "disclaim," in legal parlance) the implied warranty if they sell the vehicle "as is," which they typically do. In the few states that prohibit dealers from disclaiming the implied warranty (such as the District of Columbia, Maryland, Massachusetts and West Virginia), the UCC can be more effective than a used-car lemon law would be.
• The Federal Trade Commission's Used Car Rule: The Federal Trade Commission (FTC) requires dealers who sell five or more cars per year to post a Buyers Guide in every used car that's offered for sale. The guide must show whether the vehicle is being sold "as is" or with a used-car warranty, what percentage (if any) of repair costs is covered by the dealer under the warranty and a list of the major defects that can occur on used vehicles.
• Magnuson-Moss Warranty Act (a.k.a. federal lemon law): This law prohibits the disclaimer of an implied warranty when a car is sold with an express written warranty. It also provides for the awarding of attorney fees in particular cases.

How To Prepare for Battle

In order to determine if you truly have a lemon and to build a solid argument, make sure you've taken the following steps.

First, run vehicle history reports from AutoCheck. Van Alst also recommends a check of the federal government's National Motor Vehicle Title Information System, which can be obtained through various vehicle-history vendors at a low cost. These reports expose many of the hidden problems associated with used cars, such as prior accidents and branded titles. Edmunds recommends that buyers run all three reports if possible. They can sometimes uncover different information. An important fact to consider: U.S. states do not require insurance companies to report when they fix a vehicle, although Canada does.

Do not rely on reports alone. Take the car to a qualified mechanic and a body shop that can spot signs of structural damage. Make sure they put it up on a lift. As with vehicle history reports, this is best done before the vehicle purchase, but if you're trying to press your rights under state or federal lemon laws, it's critical to determine the source of the vehicle's problem.

Document the vehicle's service history and retain all work orders and receipts. Download or print a vehicle repair log from Fraud Guides or Microsoft.

If the dealer still won't provide satisfaction, or if you suspect fraud, send a complaint in writing to the vehicle's manufacturer and your state's attorney general's office or department of consumer protection. The federal government's Consumer Action Web site provides detailed information on how and where to file complaints (including sample letters), dispute resolution services, small claims court and more.

Calling Out the Big Guns

You don't necessarily have to engage a lawyer to fight for your rights. Sometimes, a quick trip to small claims court will do the trick. But a good lemon-law attorney can determine whether you've got a serious case, especially when safety is an issue, and can shepherd you through the legal process. Many lemon lawyers don't charge client fees, hoping to collect instead from the defendant.

You can find lemon law specialists in your state through the National Association of Consumer Advocates. Free legal aid to low-income individuals is available through the nonprofit Legal Services Corporation and National Legal Aid and Defender Association.