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Complying with used car warranty law isn’t optional—your entire business may depend on it
Running an auto dealership is no easy task, and as GM, you likely spend lots of time figuring out ways to make the sales process run smoother and how to turn your team into a well-oiled machine. However, for all the important work you’re doing to improve your dealership and move it into the future, there are probably lingering thoughts in your mind about compliance.
Full compliance is the foundation of any successful dealership. Is your dealership always compliant in every area of the business? If not, you may want to start refreshing your memory on the major rules and then give your team a few refresher courses as well. A great place to start is with used car warranty law.
It’s time to brush up on used car warranty law
You may have a love/hate relationship with warranties. They come with a lot of rules and regulations, but they can also be extremely profitable for your dealership. However, if individual employees choose to ignore used car warranty law, your dealership could face various penalties, depending on the compliance violation. For example, dealers who violate the FTC’s Used Car Rule may have to pay fines of up to $16,000—per violation. Make too many serious mistakes on a regular basis, and you could even lose your business.
Here are a few regulations under used car warranty law that your dealership needs to follow. These rules should not be used in place of professional legal advice, so be sure to speak with an attorney if you’re not sure about your dealership’s compliance obligations.
1. Used Car Rule
If your dealership sells more than five used vehicles in a 12-month period, you’re on the hook for complying with the FTC’s Used Car Rule. The Used Car Rule applies in every state except Maine and Wisconsin.
2. Buyer’s Guide
You must post a Buyer’s Guide in the window of every used car you offer for sale. The guide should contain complete details about whether or not your dealership offers a warranty, and if so, what the warranty includes.
3. As is disclosure
An “As Is” disclosure isn’t legal in every state. 14 states and the District of Columbia don’t allow “as is” sales for many used vehicles, and three other states require different disclosures from those on the Buyer’s Guide to create a legitimate “as is” sale.
4. Sales contracts
The Buyer’s Guide becomes part of the sales contract and overrides any contrary provisions. For example, the FTC says that if the Buyer’s Guide notes that a car comes with a warranty, and the contract says the car is sold “as is,” you must give the customer the warranty described in the guide.
5. Final changes
Once the sale is complete, you must give the buyer the original or a copy of the vehicle’s Buyer’s Guide. It must reflect all final changes.
6. Lemon law
Under the Magnuson-Moss Act (known informally as the Federal Lemon Law), your dealership is required to:
a) title a written warranty as either “full” or “limited”
b) state specific information about the coverage of the warranty in a single, clear, and easy-to-read document, and
c) ensure that warranties are available where your warranted consumer products are sold so that consumers can read them before buying.
7. Warranty law
Dealerships and manufacturers aren’t allowed to deny a warranty claim or void a warranty if a consumer went to an independent mechanic, a chain shop, or performed repairs/routine maintenance on their own.
8. Warranty validity
A customer’s warranty is not void if another mechanic used parts that:
a) weren’t made by the vehicle manufacturer or
b) were formerly installed in a new vehicle by the manufacturer, but were then later removed and made available for reuse.
Everyone in your dealership should understand used car warranty law, but put specific individuals in charge of enforcing the rules and ensuring dealership-wide compliance. Some dealerships choose to hire a full-time compliance officer, but it’s also a good idea to have your sales manager leading the charge, as well as anyone in finance who provides customers with warranty paperwork.
Used car warranty law is relatively uniform across the country, but some laws may be different depending on what state you’re operating in. If you’re not sure what your obligations are, speak with an attorney or do an online search to see if your state has a website with this information.