00-How the Magnuson Moss Act Affects Your Dealership Warranties-01-01

You need to know your obligations to the consumer and when you must honor their warranty in your auto dealership.

01-12 Auto Sales Promotions to Boost Revenue-01Working in an auto dealership, you’ve hopefully already done your homework when it comes to the Magnuson Moss Act — informally known as the Federal Lemon Law.

The purpose of the Act is to ensure that your customers can get complete information about warranty terms and conditions, and so that they have an opportunity to compare coverage before buying. The Magnuson Moss Act also promotes competition among dealerships on the basis of warranty coverage and strengthens incentives for dealerships to perform their warranty obligations in a timely manner.

But what are your obligations under the Magnuson Moss Act once the warranty has been purchased and your customer drives their new vehicle off your lot?

It is essential that your entire team understands what they do — and don’t — have to repair under the customer’s warranty. If a consumer has their warranty claim unfairly denied, it doesn’t just create a possible public relations issue for your dealership — the individual could also file a complaint with the state Attorney General, the local consumer protection office, or the Federal Trade Commission (FTC).

Under the Magnuson Moss Act, customers with warranties don’t always have to come to you for repairs or parts

Among not only consumers, but dealerships as well, is this misconception that in order for a warranty claim to be valid, all repairs must be done in your dealership. That is simply not true. Dealerships and manufacturers cannot deny a warranty claim or void a warranty if the consumer went to an independent mechanic, a chain shop, or performed repairs or routine maintenance on their own.01-How the Magnuson Moss Act Affects Your Dealership Warranties-01

Another portion of the Magnuson Moss Act that often needs reinforcing surrounds aftermarket and recycled parts. If you have a customer that has repairs performed and the other mechanic uses 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, that does not void their warranty.

Exceptions under the Magnuson Moss Act

There are, of course, exceptions to every rule — and you need to make sure your team fully grasps these exceptions:

  • Consumers can be required to use certain repair facilities if the services are provided free of charge under the warranty.
  • Similarly, consumers can also be required to use select parts if those parts are provided free of charge under the warranty.
  • If an aftermarket or recycled part caused a problem, you have the right to deny a warranty repair. However, you have to be able to prove that the part was directly responsible for the issue.

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For example, if a consumer had a flex pipe replaced at an independent mechanic that used a recycled part, and that pipe malfunctioned and caused the entire exhaust system to go, you could refuse to fix the exhaust system under the warranty. You would, though, need to be able to prove that the flex pipe was directly responsible for the failure of the exhaust system (and not another defect or issue).

Compliance is key with the Magnuson Moss Act

Some consumers know they need warranties, but they never actually take the time to fully understand the terms of what they are buying.

When selling a warranty to a customer, take a few extra minutes to ensure they fully understand their coverage and the warranty period. Encourage them to follow the manufacturer’s recommended service schedule and keep all receipts and service records. You can’t force them to care at the time or completely understand the terms of the warranty in that moment, but you will hopefully set them up for success and be able to avoid future issues with their warranty.

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