Most
car dealers who sell used vehicles must comply with the Federal Trade
Commission's (FTC's) Used Car Rule. In fact, car dealers who sell, or
offer for sale, more than five used vehicles in a 12-month period must comply
with the Rule. Banks and financial institutions are exempt from the Rule, as
are businesses that sell vehicles to their employees, and lessors who sell a
leased vehicle to a lessee, an employee of the lessee, or a buyer found by the
lessee.
The Used Car Rule applies in all states
except Maine and Wisconsin. These two states are exempt because they have
similar regulations that require dealers to post disclosures on used vehicles.
The Rule applies in the District of Columbia, Puerto Rico, Guam, the U.S.
Virgin Islands, and American Samoa.
This booklet defines the Rule's
requirements, explains how to prepare and display the Buyers Guide, and
offers a compliance checklist.
You must post a Buyers Guide before
you display a vehicle for sale or let a customer inspect it for the purpose of
buying it, even if the car is not fully prepared for delivery. You also must
display a Buyer’s Guide on used vehicles for sale on your lot through
consignment, power of attorney, or other agreement. At public auctions, dealers
and the auction company must comply. The Rule does not apply at auctions that
are closed to consumers.
Previously titled or not, any vehicle
driven for purposes other than moving or test driving is considered a used
vehicle, including light-duty vans, light-duty trucks, demonstrators, and
program cars that meet the following specifications:
a
gross vehicle weight rating (GVWR) of less than 8,500 pounds;
a
curb weight of less than 6,000 pounds; and
A
frontal area of less than 46 square feet.
Exceptions to the Rule are:
motorcycles;
any
vehicle sold for scrap or parts if the dealer submits title documents to the
appropriate state authority and obtains a salvage certification; and
Agricultural
equipment.
A disclosure document that gives consumers
important purchasing and warranty information, the Buyers Guide tells
consumers:
the
major mechanical and electrical systems on the car, as well as some of the
major problems that consumers should look out for;
whether
the vehicle is being sold "as is" or with a warranty;
what
percentage of the repair costs a dealer will pay under warranty;
that
oral promises are difficult to enforce;
to
get all promises in writing;
to
ask to have the car inspected by an independent mechanic before they buy;
to
get a vehicle history report and to visit ftc.gov/used cars for information on
how to get a vehicle history report, how to check for safety recalls, and other
topics; and
To
ask for a Spanish Buyers Guide if the sale is conducted in Spanish; and to keep
the Buyers Guide for reference after the sale.
The
Buyers Guide must be displayed prominently and conspicuously on or in a vehicle
when a car is available for sale. This means it must be in plain view and both
sides must be visible. You can hang the Guide from the rear-view mirror inside
the car or on a side-view mirror outside the car. You also can place it under a
windshield wiper. The Guide also can be attached to a side window. A Guide in a
glove compartment, trunk or under the seat is not conspicuous because it is not
in plain sight.
You may remove the Guide for a test drive,
but you must replace it as soon as the test drive is over.
At the top of the Guide, fill in the
vehicle make, model, model year, and vehicle identification number (VIN). Write
in a dealer stock number if you wish.
On the back of the Guide, fill in the name
and address of your dealership. Also fill in the name (or position) and the
telephone number of the person the consumer should contact with complaints. You
may use a rubber stamp or preprint your Guide with this information.
You may include a signature line on the
Guide and you may ask the buyer to sign to acknowledge that he or she has
received the Guide. If you opt for a signature line, you must include a
disclosure near it that says: "I hereby acknowledge receipt of the Buyers
Guide at the closing of this sale." This language can be preprinted on the
form. The signature line and the required disclosure must appear in the space
provided for the name of the individual to be contacted in the event of
complaints after the sale.
The
Buyers Guide has two versions: One says "As Is-No Dealer Warranty;"
the other says "Implied Warranties only."
As
Is-No Dealer Warranty. If state law allows it, and you choose not to offer a
warranty — written or implied — you must use the "As Is" version and
check the box next to the heading "As Is-No Dealer Warranty" on the
Guide.
Implied
Warranties Only. In
states that limit or prohibit the elimination of implied warranties, you must
use the "Implied Warranties Only" version and check the box next to the
"Implied Warranties Only" if you don't offer a written warranty.
Warranty. If you offer the
vehicle with an express warranty, you must check the box next to the heading
"Warranty" and complete that section of the Guide. Warranties
required by state law must be disclosed in this section. Your state Attorney
General can tell you about state warranty requirements.
State Law. In some states, use of the "As Is-No
Dealer Warranty" Buyers Guide may be legally sufficient to eliminate
implied warranties. In other states "as is" sales are allowed only if
specific action is taken or certain language is used. For example, some states
may require you to eliminate implied warranties by using special language
and/or a document other than the Guide.
If you're not sure which version of the
Buyers Guide you should use or if you have questions about state requirements,
contact the FTC or your state Attorney General's office.
Is
the Warranty "Full" or "Limited"?
For a warranty to be considered
"full:"
Warranty
service must be provided to anyone who owns the vehicle during the warranty
period.
Warranty
service must be provided free of charge when necessary, even for services like
removing and reinstalling a system covered by the warranty.
The
consumer must be able to choose either a replacement or a refund if the vehicle
can't be repaired after a reasonable number of tries.
The
consumer is not required to take any action to receive service, except to give
notice that service is needed. Service must be rendered after notice unless the
warrantor can demonstrate that it is reasonable to require consumers to do more
than give notice.
The
length of implied warranties must not be limited.
The warranty is considered
"limited" if any of these conditions doesn't apply.
What
Percentage of Costs Does the Warranty Cover?
Fill in the percentage of parts and labor
costs covered by the warranty in the spaces provided. If a deductible applies
to repairs made under the warranty, put an asterisk next to the number and
explain the deductible in the "systems covered/duration" section. For
example, "*A $50 deductible applies to each repair visit."
What
Systems Are Covered? For How Long?
There's one column to list the systems
covered, and another to list the length of the warranty for each system. In the
left hand column, you must specify each system that's covered by the warranty.
The Rule prohibits the use of shorthand phrases such as "drive train"
or "power train" because it's not always clear what specific
components are included in the "power train" or "drive
train."
In the right hand column, you must state
the length of the warranty for each system. If all systems are covered for the
same length of time, you may state the duration once.
What
if the Manufacturer’s Warranty Still Applies?
If the manufacturer's warranty hasn't
expired, you may disclose this fact by checking the box, "MANUFACTURER'S WARRANTY
STILL APPLIES. The manufacturer's original warranty has not expired on some
components of the vehicle,” in the Non-Dealer Warranties for this Vehicle
section of the Buyers Guide.
If the consumer must pay to get coverage
under the manufacturer's warranty, you may not check the "Warranty"
box. Such coverage is considered a service contract. However, you may check the
"Warranty" box if you pay for coverage from the manufacturer and the
consumer doesn't have to pay anything more than the price of the vehicle to get
the coverage. If you provide a warranty in addition to the unexpired
manufacturer's warranty, explain the terms of your warranty on the Buyers
Guide.
Where
Should Negotiated Warranty Changes Be Included?
If you and the consumer negotiate changes
in the warranty, the Buyers Guide must reflect the changes. For example, if you
offer to cover 50 percent of the cost of parts and labor for certain repairs,
but agree to cover 100 percent of the cost of parts and labor after negotiating
with the customer, you must cross out the "50 percent" disclosure and
write in "100 percent." Similarly, if you first offer the vehicle
"as is" but then agree to provide a warranty, you must cross out the
"As Is-No Dealer Warranty" disclosure and complete the
"Warranty" section of the Buyers Guide properly.
What about Service
Contracts?
If you offer a service contract for
repairs, check the box next to the words "Service Contract." However,
if your state regulates service contracts as the "business of
insurance," you don't have to check this box. Check with your Attorney
General or state insurance commissioner to find out if your state regulates
service contracts as insurance.
What Do I Have to Give
the Buyer At the Sale?
You must give the buyer the original or a
copy of the vehicle's Buyers Guide at the sale. The Guide must reflect all
final changes. If you include a signature line on your Buyers Guides, make sure
the buyer signs the Guide that reflects all final changes.
If you offer a written warranty, or if the
manufacturer's warranty still applies, you also must comply with the
Magnuson-Moss Warranty Act and other FTC Rules, including the "Warranty
Disclosure Rule." The Warranty Act contains provisions that establish
consumers' rights with respect to written warranties. For example, the Act
prohibits you from eliminating implied warranties when you provide a written
warranty.
The Warranty Disclosure Rule requires that
you disclose certain information about the coverage of your warranty and
consumers' rights under state law. This information must be included in a
single document that is clear and easy to read.
Can the Buyers Guide
Serve As My Written Warranty?
The warranty information you provide on the
Buyers Guide is not sufficient to meet the requirements of the Warranty
Disclosure Rule. Therefore, your written warranty and the Buyers Guide must be
two separate documents.
Another federal rule — the FTC's Rule
on Pre-Sale Availability of Written Warranty Terms — requires that you
display written warranties in close proximity to the vehicle or make them
available to consumers, upon request, before they buy.
You also may be interested in A
Businessperson's Guide to Federal Warranty Law. It explains the Magnuson-Moss
Warranty Act, the federal law governing warranties on consumer products.
What
Disclosures Should I Make if I Offer a 50/50 Warranty or Another Type of Split
Cost Warranty?
Split cost warranties are those under which
the dealer pays less than 100% of the cost for a warranty repair. This type of
warranty includes 50/50 warranties where the dealer pays 50% of the cost for a
covered repair and the buyer pays the remaining 50%. Another type of split cost
warranty is one under which the buyer pays a deductible amount and the dealer
pays the remaining cost for the repair.
If you offer a split cost warranty that
requires you to pay a percentage of the repair cost for covered repairs, you
should include the following disclosures in your warranty document:
The
percentage of the total repair cost you will pay.
The
percentage of the total repair cost the buyer must pay.
How
the total cost of the repair will be determined. For example, your warranty
might state: "The total cost of a warranty repair will be the retail price
ABC motors charges for the job." As another example, your warranty might
state: "The total cost of a warranty repair will be determined by adding
the dealer's cost for parts to the labor cost. Labor will be billed at a rate
of ________ per hour for the actual time required to complete the repair."
As a final example, your warranty might state: "If the work is done by an
outside repair shop, total cost of a repair will be the price ABC Motors is charged
by the outside shop. If the work is done by ABC Motors, the total cost of the
repair will be the same price ABC Motors charges non-warranty customers for the
same job."
If your warranty requires buyers to pay a
deductible, your warranty document should disclose the deductible amount and
the details as to when and under what circumstances the deductible must be
paid.
Dealers offering split cost warranties can
require that buyers return to the dealer for warranty repairs. If your warranty
includes this restriction, however, you should provide an estimate of the total
repair cost before work is started. This will allow the buyer to decide whether
to approve the repair or have the work done elsewhere.
