Express Warranties and the Lemon Law

Over and above individual state Lemon Laws, the federal Magnuson-Moss Warranty Act standardizes express warranties and requires car dealers to disclose the terms of any written warranties provided to consumers.

Manufacturers’ Warranties

A new vehicle typically comes with a manufacturer’s limited warranty that covers a certain length of time or number of miles. Lemon Laws frequently come into play when the express warranty is breached. In other words, the manufacturer promises that certain components or systems will work, and if they don’t, then they will be repaired. When the manufacturer (or the dealer, as the manufacturer’s representative) doesn’t fix a problem in a reasonable number of attempts, the warranty is breached and you may also have a Lemon Law claim.

If a used vehicle is fairly new, it may still be covered under the original manufacturer’s warranty, and thus may be covered under a state’s new car Lemon Law. If the manufacturer’s warranty still is in effect, the dealer may include it in the “systems covered/duration” section of the Federal Trade Commission Buyers Guide that comes with the vehicle. To make sure you can take advantage of the coverage, ask the dealer for the car’s warranty documents. Verify the information (what’s covered, expiration date/miles, necessary paperwork) by calling the manufacturer’s zone office. Make sure you have the Vehicle Identification Number (VIN) when you call.

Used Car Full and Limited Warranties

Dealers may offer a full or limited warranty on all or some of a used vehicle’s systems or components. These are express warranties. Most used car warranties are limited and their coverage varies. A full warranty includes the following terms and conditions:

• Anyone who owns the vehicle during the warranty period is entitled to warranty service.
• Warranty service will be provided free of charge, including such costs as removing and reinstalling a covered system.
• You have the choice of a replacement or a full refund if, after a reasonable number of tries, the dealer cannot repair the vehicle or a covered system.
• You only have to tell the dealer that warranty service is needed in order to get it unless the dealer can prove that it is reasonable to require you to do more.
• Implied warranties (such as the warranty of merchantability and the warranty of fitness for a particular purpose) have no time limits.

If any of these statements don’t apply, the warranty is limited.

A full or limited warranty doesn’t have to cover the entire vehicle. The dealer may specify that only certain systems are covered. Some parts or systems may be covered by a full warranty; others by a limited warranty.

When you buy a used vehicle, the dealer must check the appropriate box on the Federal Trade Commission Buyers Guide to indicate whether the warranty is full or limited, and the dealer must include the following information in the “Warranty” section:

• the percentage of the repair cost that the dealer will pay. For example, “the dealer will pay 100 percent of the labor and 100 percent of the parts . . .”;
• the specific parts and systems – such as the frame, body, or brake system – that are covered by the warranty. The back of the Buyers Guide lists the major systems where problems may occur;
• the warranty term for each covered system. For example, “30 days or 1,000 miles, whichever comes first”; and
• whether there’s a deductible and, if so, how much.

You have the right to see a copy of the dealer’s warranty before you buy. Review it carefully to determine what is covered. The warranty gives detailed information, such as how to get repairs for a covered system or part. It also tells who is legally responsible for fulfilling the terms of the warranty. If it’s a third party, investigate their reputation and whether they’re insured. Find out the name of the insurer, and call to verify the information. Then check out the third-party company with your local Better Business Bureau. That’s not foolproof, but it is prudent. Make sure you receive a copy of the dealer’s warranty document if you buy a car that is offered with a warranty.

Service Contracts

Like a warranty, a service contract is an express warranty and provides repair and/or maintenance for a specific period. But warranties are included in the price of a product, while service contracts cost extra and are sold separately. To decide if you need a service contract, consider whether:

• the service contract duplicates warranty coverage or offers protection that begins after the warranty runs out. Does the service contract extend beyond the time you expect to own the car? If so, is the service contract transferable or is a shorter contract available?
• the vehicle is likely to need repairs and their potential costs. You can determine the value of a service contract by figuring whether the cost of repairs is likely to exceed the price of the contract.
• the service contract covers all parts and systems. Check out all claims carefully. For example, “bumper to bumper” coverage may not mean what you think.
• a deductible is required and, if so, the amount and terms.
• the contract covers incidental expenses, such as towing and rental car charges while your car is being serviced.
• repairs and routine maintenance, such as oil changes, have to be done at the dealer.
• there are a cancellation and refund policy for the service contract and whether there are cancellation fees.
• the dealer or company offering the service contract is reputable. Read the contract carefully to determine who is legally responsible for fulfilling the terms of the contract. Some dealers sell third-party service contracts.

If you buy a service contract from the dealer within 90 days of buying a used vehicle, federal law prohibits the dealer from eliminating implied warranties on the systems covered in the contract. For example, if you buy a used car “as is,” the car normally is not covered by implied warranties. But if you buy a service contract covering the engine, you automatically get implied warranties on the engine. These may give you protection beyond the scope of the service contract. Make sure you get written confirmation that your service contract is in effect.

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