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2015 GNYADA Membership Directory
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cars. The FTC filed a lawsuit against the dealer in the
U.S. District Court for the Eastern District of Arkansas
seeking civil penalties of $16,000 for each vehicle sold
without the Buyer’s Guide and injunctive relief. The
case is scheduled to go to trial in July 2015.
The Used Car Rule applies in all states except Maine and
Wisconsin, both of which have enacted their own state
law provisions for required notices that require additional
disclosures for used car sales in these states.
Magnuson-Moss Warranty Act (“MMWA”)
This is a federal law that requires manufacturers and sellers to disclose information about warranties given with
the sale of a product. A warranty is a statement or representation, express or implied, about the character or
quality of the goods sold. Express warranties result from statements or affirmations made about a product that
the buyer relies upon in deciding to purchase. The MMWA covers written express warranties. Implied warranties
derive from state law and automatically attach to the vehicle from the sale, such as an implied warranty of
merchantability, which is a promise the vehicle will perform in a manner fit for its usual and ordinary purposes.
The MMWA requires any warranty to be clearly and conspicuously labeled as“full”or“limited”and be described
in a single, easy-to-read document and to state any qualifications to the warranty (such as the consumer
performing scheduled maintenance) with the full warranty terms available. At minimum, the document
must describe who is making the warranty; when the warranty begins and ends; what is covered and what
is not; what the warrantor will do if there is a problem; and how the consumer can obtain warranty service.
It must also indicate that the consumer may have additional rights under state law and contain the following
specific disclosures: “This warranty gives you specific legal rights, and you may also have other rights which
vary from state to state. Some states do not allow limitations on how long an implied warranty lasts, so the
above limitation may not apply to you.” If a dealer sells the customer its own service contract within 90 days
of the vehicle sale (as opposed to the consumer purchasing a service contract from a third party), the dealer
cannot disclaim any implied warranties but the duration of implied warranties can be limited under certain
circumstances.
A common misconception concerns the concept of an “extended warranty” versus a service contract. For a new
car, a warranty is included in the vehicle price and it provides the customer a right from the manufacturer to
obtain certain repair services that must be adequately described under MMWA. Manufacturer warranties do
not cover aftermarket products such as dealer-added equipment. Some vehicle manufacturers permit transfer
of unexpired warranties to subsequent purchasers, and state laws restrict or limit any charges that can be
imposed for doing so. Used car dealers can also provide warranties for the vehicles they sell, but a dealer cannot
charge a customer for a warranty; it must be included in the cost of the car. If the customer pays separately for
additional coverage, that is a “service contract.” Third parties also sell service contracts. Some states require
implied warranties in any vehicle sale. Other states permit “as is” sales of used cars. Used car warranties and
the availability of a manufacturer’s warranty must be disclosed in the Used Car Buyer’s Guide discussed earlier
in this Chapter.