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Every contract for sale carries a warranty by the seller that the title conveyed is good and its transfer rightful, and that the goods will be delivered free from any security interest or other lien or encumbrance, unless the buyer has actual knowledge (not just constructive knowledge) at the time of contracting of such encumbrance.² The seller’s lack of knowledge of the title problem is irrelevant.³ Thus this warranty will be breached when a car does not have good title, as when the car has been stolen

Express warranties cannot be disclaimed.⁶ No matter how cautious a used car dealer is, any used car sale will come with a number of express warranties that can provide a basis to revoke acceptance, withhold payments, or pursue a damage claim, even in an “as is” used car sale. As with any other warranty breach, the consumer need not show the dealer’s intent or even knowledge of the breach, only that the express warranty is breached.

Unless the manufacturer’s written warranty expressly limits itself to the first purchaser, any subsequent car owner has rights under the manufacturer’s original written warranty.¹² If certain parts are covered for five years under the warranty, and a car is sold after four years, the subsequent owner has rights under the warranty’s final year.

Manufacturers offer written warranties on some used cars, even when the factory warranty is no longer in effect, as when a consumer purchases a car that the manufacturer had previously bought back under a state lemon law or as a goodwill gesture.

If a dealer refuses to comply with used car lemon law rights, New York and Rhode Island consumers must submit the dispute to a dispute resolution mechanism,²³⁴ but only if the mechanism complies with Magnuson-Moss dispute resolution regulations.²³⁵ In New York a party seeking to vacate or modify an award under the state lemon law dispute resolution mechanism must show that the award was not in accord with due process or supported by adequate evidence in the record, was not rational, or was arbit

New car lemon laws may apply to used cars in certain limited circumstances.

In addition to the six used car lemon laws described in § 15.5.2, supra, there are at least eight states that create statutory used car warranties or other minimum standards for the sale of used cars. Many of these laws are similar to lemon laws in that they require used car warranties in certain circumstances, or set substantive standards that used cars must meet.

A number of jurisdictions restrict or prohibit disclaimers of implied warranties for consumer goods more generally, typically applying as well to used cars. California, the District of Columbia, Kansas, Louisiana, Maryland, Massachusetts, Minnesota, Mississippi, Oregon, and West Virginia have particularly significant restrictions.

Many states require periodic inspection of motor vehicles to ensure that they can be driven safely.²⁸⁴ The scope of these statutes vary, but generally cover such safety items as brakes, tires, lights, windshield wipers, and turn signals. Some statutes also cover items affecting mechanical condition and appearance.

The following state-by-state summary lists provisions that restrict disclaimers of used car warranties or set minimum standards for a used car’s condition, including used car lemon laws, statutory warranty laws, and UDAP provisions that apply specifically to used cars or warranty disclaimers.

The Federal Trade Commission’s Used Motor Vehicle Trade Regulation Rule (FTC Used Car Rule) requires that dealers and other covered sellers disclose certain warranty information when selling used cars. This information must be disclosed on a “Buyers Guide” affixed to the window of the used cars.⁴¹⁰ The rule provides consumers with no new substantive warranty rights but merely requires disclosure of existing warranties and prohibits certain deceptive representations.

The FTC Used Car Rule covers all used motor vehicles.⁴¹⁵ A “used vehicle” is defined as “any vehicle driven more than the limited use necessary in moving or road testing a new vehicle prior to delivery to a consumer.”⁴¹⁶ The definition thus includes demonstrators,⁴¹⁷ even if they have never been titled to a retail buyer. The rule may also be applicable to more novel lending arrangements for existing car owners.

The rule is not clear as to whether it applies to leases of used vehicles or only to sales of used vehicles. This lack of clarity may be explained by the fact that when the rule was enacted, used vehicles were rarely leased.

The rule applies to any person or business that offers a used vehicle for sale after selling or offering for sale five or more used vehicles in the previous twelve months.⁴³² The rule therefore applies not just to licensed vehicle dealers but to curbside sellers,⁴³³ consignments to or from dealers,⁴³⁴ automobile repair shops, and other occasional sellers as long as they meet the rule’s numerical requirements.

Used car dealers provide assurances in writing that constitute UCC express warranties more often than might be imagined.

A dealer’s representation that a car is a “certified” used car is a dealer warranty that the car in fact meets the standards of, and is enrolled in, the manufacturer’s certified used car program or some other certified used car program.³¹ Such a statement is a description of the goods that is part of the basis of the bargain.³² As the dealer has to pay a fee to the manufacturer for each car enrolled in the certification program, sometimes the dealer will represent that a car is certified when in fac

Dealers make a number of express warranties that do not meet the Magnuson-Moss standards for a written warranty, but still provide a basis to cancel the sale or for a UCC damage action. The sales agreement or other dealer documentation will describe the car’s make, model and year, and the options purchased.

Federal law requires that any used car transfer include an odometer disclosure on the car’s old title, a reassignment document, or a power of attorney.⁴⁶ If the transferor knows that the odometer reading does not reflect the actual mileage the car has been driven, that fact must be disclosed. In addition, the odometer reading is typically found on purchase orders, sales agreements, and other documents, as well as appearing on the odometer itself.

Lemon laundering is the practice of manufacturers reselling cars returned to them as lemons without informing the ultimate consumer buyer about the car’s repair history. A consumer purchasing a laundered lemon has various warranty rights. As lemon buybacks usually occur early in the manufacturer’s warranty, the subsequent consumer purchaser may have rights under the original manufacturer’s written warranty.⁵⁰

A consumer may purchase a used car without being informed that the car was rebuilt after being declared salvage—that is, an insurance company had declared the car a total loss because it would be too expensive to repair. Almost by definition, a shop must cut corners as to vehicle safety or in other areas when rebuilding a salvage vehicle to make it economically viable to resell the car.

The dealer’s sales personnel make oral vehicle representations which are express warranties, such as that the vehicle:

An implied warranty of merchantability arises in every sale by a merchant of a used vehicle,⁷⁴ except possibly in Alabama, where some questionable cases have held that implied warranties do not arise in the sale of used goods.⁷⁵ Sometimes used car dealers sell vehicles that actually belong to their employees or to friends or family members. If the actual owner is not a merchant, the implied warranty of merchantability will arise only if the dealer is considered the seller.

Used vehicles should be held to the same standards as new vehicles regarding essential qualities.⁷⁹ A used vehicle should be in reasonably safe condition and substantially free of defects that impair its operation.⁸⁰ It should perform up to the level reasonably expected of a car of the same age, mileage, and price.⁸¹ The fact that a used car can be driven does not necessarily mean that it is merchantable.⁸² L

The Magnuson-Moss Warranty Act prohibits a dealer from disclaiming implied warranties and makes those disclaimers ineffective whenever the dealer offers a Magnuson-Moss written warranty or enters into a service contract with the consumer.¹²³ Even when a written warranty or such a service contract only covers certain vehicle component parts, the Magnuson-Moss Warranty Act prevents dealers from disclaiming implied warranties on any part of the vehicle.

The rule applies in all fifty states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, and American Samoa.⁴⁴⁹ The two exceptions are Maine and Wisconsin, which have been granted exemptions because state law provides similar protections to the Used Car Rule.⁴⁵⁰ The rule also covers vehicles exported from the United States for sale at military post exchanges.⁴⁵¹