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Several state motor vehicle laws provide enhanced damages for warranty violations, even those involving used cars. Colorado⁵⁶⁷ and New Mexico,⁵⁶⁸ for example, give consumers a special private cause of action, including attorney fees and multiple damages in some circumstances, for breach of a manufacturer’s warranty. This claim might be available to consumers who buy demonstrators, lemon buybacks, or other used cars that are still under a manufacturer’s warranty.

A state deceptive practices (UDAP) statute can be pleaded in many used car warranty cases.⁵⁷³ UDAP claims offer enhanced remedies such as statutory damages, treble damages, sometimes punitive damages, and attorney fees. In addition, a UDAP claim may avoid the parol evidence rule and similar impediments to warranty claims.⁵⁷⁴ There are rarely scope issues in applying state UDAP statutes to the sale of used cars for consumer purposes.

Another UDAP claim in used car warranty cases may be that the dealer failed to disclose known vehicle defects.⁵⁷⁸ UDAP statutes prohibit not only oral deception but the failure to disclose. Although the FTC considered and rejected a requirement in its Used Car Rule that dealers disclose known defects, compliance with the rule does not foreclose a UDAP action alleging that the dealer failed to disclose known defects.⁵⁷⁹

Compliance with the FTC Used Car Rule is no defense to a consumer’s UDAP claim, even one based on the failure to disclose a known defect. The failure to disclose known defects is an actionable state UDAP violation even when the dealer had complied with the Used Car Rule by disclosing the warranty “as is.”⁵⁸⁷ Enactment of the Used Car Rule does not generally preempt state regulation of the area, so the state UDAP statute can be used to challenge conduct not prohibited by the rule.⁵⁸⁸

Common law fraud claims carry a stricter burden of proof but have many of the same advantages as UDAP claims.

The UCC imposes a non-disclaimable obligation of good faith in the performance or enforcement of every contract.⁶⁰⁰ Comment 3 to UCC § 2-314 makes it clear that the duty of good faith requires sellers to make full disclosure of known material and hidden defects.⁶⁰¹

Motor vehicle defects are often a result of a used car being offered for sale having been driven many more miles than represented. In general, though, claims under the federal odometer statute is the preferred approach over warranty claims. A prior section examined breach of express warranty claims concerning odometer misrepresentations.⁶⁰⁵

Sometimes the reason a used car has so many defects is that it is a laundered lemon, that is, it is a vehicle returned as a lemon and then resold without disclosure of its history. Most states have lemon laundering statutes;⁶¹² violations of those statutes are subject to their own special remedies or will be state UDAP violations. Even if the dealer discloses that the car was a lemon buyback, the state lemon law may impose an affirmative duty on the manufacturer to repair the defects before reselling the car.

Examining a vehicle’s title history can help uncover lemon laundering. A car returned to the manufacturer, particularly during the warranty period, is usually a lemon, unless it was used as a short-term lease vehicle. (Most short-term leases will have a prior owner that was a business, not an individual.)

The undisclosed sale of a salvage vehicle or one that was previously used as a rental car or taxi is often accompanied by a number of vehicle defects.

About half the states have enacted new car damage disclosure laws.⁶²¹ These laws require disclosure of damage exceeding a certain percentage of a new vehicle’s price that occurs while it is in the control of the manufacturer or dealer. Courts have interpreted these statutes to require disclosure of repairs necessitated not only by accidents but also by mechanical breakdowns.⁶²²

Because most used car sales involve credit originated by or arranged by the dealer, consumers can raise warranty or other claims they have against the insolvent dealer against the party holding the loan paper. The FTC Holder Rule requires that the loan paperwork include a notice that the holder is subject to not only the consumer’s defenses but also to affirmative claims against the dealer.

Most states require that car dealers post a bond as a condition to securing a license to do business in the state.

Several states, including California, Virginia, and West Virginia, supplement the dealer bond statute with a dealer compensation fund.⁶³⁹ A compensation fund typically requires all dealers to contribute annually, and the fund then provides coverage for specified categories of claims by consumers against insolvent dealers. Allowable claims under existing funds typically are limited to claims such as a dealer’s failure to pay off liens on trade-in vehicles or failure to provide good title to purchased vehicles.

States differ as to how they define assistive technological devices. Each statute should be researched to determine the full scope of its coverage.

The Medical Device Amendments to the Food, Drug and Cosmetics Act require the Food and Drug Administration (FDA) to review and regulate medical devices.¹⁷ Medical devices are subject to varying levels of review depending upon their classification.

As with automobiles, a “lemon” in the context of assistive technological devices usually means a device that fails to work despite a certain number of repair attempts being made within a stated time period. The concept of “repair attempt” should be construed broadly to encompass any type of visit to the dealer seeking corrections to the device.

Warranties provided by AT device lemon laws vary. Most provide for a one-year express warranty and require the repair of any defect at no cost to the consumer. In some states the period may be tolled based on the number of days the device is out of service or being repaired.⁴²

If the dealer damages the vehicle while installing optional manufacturer-approved accessories or while preparing the vehicle for sale, the buyer has a lemon law claim as long as the manufacturer’s warranty covers this damage.¹²⁵ The lemon law will also apply to defects in the aftermarket parts themselves if they are covered by the manufacturer’s warranty.¹²⁶

Generally, new car lemon law remedies are not available for defects resulting from the consumer’s abuse, neglect, or unauthorized modifications or alterations.¹³⁰ The manufacturer has the burden of proving these affirmative defenses.¹³¹ The manufacturer will need to prove not only the consumer’s abuse, but that this abuse caused the defect at issue.

The typical new car lemon law applies only if the motor vehicle fails to conform to applicable warranties and the nonconformity results in a substantial impairment of value, use, and safety.

Most courts conclude that whether there is substantial impairment includes a subjective element. Lemon laws often state that the defect must impair the use, safety, or value of the motor vehicle to the consumer.

Lemon law decisions find the following defects to substantially impair the use, value, or safety of vehicles.

Substantial impairment is a question of fact for the jury.²²⁰ Whether the consumer or manufacturer bears the burden of proving substantial impairment depends on the structure of the particular lemon law.

Under the UCC, continued use of a vehicle after revocation of acceptance is sometimes considered re-acceptance, barring revocation.²³³ By contrast, lemon laws contemplate that the buyer may continue to use the vehicle while pursuing a claim for refund or replacement.²³⁴ Lemon law statutes and case law recognize that lemon law claims can take months or years to resolve, and the typical consumer cannot simply stop driving the vehicle and purchase another.