State and federal laws protect consumers who purchase defective automobiles. These laws, known as “lemon laws” after a slang term for a defective car, enable purchasers to have the defect repaired, or to receive a replacement or a refund. A federal statute applies nationwide, but some state laws may have a broader scope or may allow more remedies for consumers. Some states’ consumer protection statutes have expanded the definition of “lemon” to other goods, including animals.
“Lemon,” as a slang term for a defective vehicle, dates back to the early 20th century. It gained fame, so to speak, thanks to a 1962 print advertisement for the Volkswagen Beetle that used the word in a self-deprecating manner. A paper published by the economist George Akerlof in 1970, entitled “The Market for ‘Lemons,’” helped associate the word with the importance of strong consumer protection laws that discourage auto dealers from withholding negative information from buyers.
Lemon laws are generally based on two types of warranties. An express warranty is a statement made by a manufacturer, distributor, or seller about the quality of a product. An implied warranty is based on common law or statute. It is broader in scope than an express warranty, and it has the purpose of assuring consumers that goods meet a minimum standard of quality and suitability for their intended purpose.
Manufacturers, and in some cases distributors and sellers, are obligated to correct any defects in their products, to replace a defective product, or to refund a customer’s money. Lemon laws provide consumers with a means of enforcing these obligations.
If a seller offers a vehicle for sale on an “as is” basis, and a buyer purchases it with knowledge of this, lemon laws do not apply because the seller has disclaimed all warranties.
The Uniform Commercial Code (UCC) is the general source of contract law adopted in some form by all 50 states and the District of Columbia. Article 2 defines many of the implied warranties covered by lemon laws and provides guidelines for express warranties. If a seller of goods makes an “affirmation of fact or promise” about the goods to a buyer, and it “becomes part of the basis of the bargain” between the buyer and the seller, that statement becomes an express warranty that the buyer may enforce. This applies even if the seller does not use words like “warrant“ or “guarantee,” or other formal legal language.
Any seller of goods is bound by the implied warranty of merchantability, which provides that goods are of reasonable quality, that they are of the same or similar quality as other goods of the same type, that they conform to any descriptions made by the seller, and that they are fit for their ordinary purpose. If a seller knows that a buyer has a specific use for certain goods, the implied warranty of fitness for a particular purpose protects the buyer. Both of these implied warranties are applicable to the sale and purchase of automobiles.
The Magnuson-Moss Warranty Act, first enacted in 1975, governs consumer product warranties. It applies to any consumer goods used by individuals or families with a retail price of $15 or more. It requires any seller making an express warranty to make a full disclosure, in easy-to-understand language, of the warranty’s terms and conditions. Sellers may not limit consumers’ rights under any implied warranties, may not impose any duties on consumers other than notifying them of defects, and must attempt repair, replacement, or refund if possible. The statute does not replace or supersede any rights a consumer may have under state law.
At the state level, lemon laws vary in four key areas:
To give one example, New York State has lemon laws covering both new and used vehicles. The New Car Lemon Law applies to personal or family cars, but not motorcycles, ATVs, or the non-vehicular portions of RVs. To be covered, a vehicle must have had a manufacturer’s express warranty at the time of the original purchase, it must have been purchased, transferred, or leased within the state of New York during the first two years after its initial delivery or its first 18,000 miles, whichever is sooner, and it must be registered in the state of New York. The Used Car Lemon Law applies to cars with less than 100,000 miles that were purchased from a used-car dealer for at least $1,500.
