DMV Dealer Continuing Education
Lemon Law and Warranties
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The Federal “Lemon” law requires manufacturers to replace a new vehicle or reimburse the Buyer if the vehicle does not conform to the warranty after a reasonable number of attempts have been made.
A “reasonable number of attempts” is one year from delivery to the Buyer or 12,000 miles, (whichever occurs first) and is defined as either:
- The same nonconformity has been subject to repair four or more times and the buyer has at least once directly notified the manufacturer of the need for the repair -or-
- The vehicle is out of service by reason of repair for more than 30 calendar days since delivery of the vehicle to the buyer
Marked Title & Decal
The Manufacturer must:
- Register the vehicle in the Manufacturer’s name
- Mark the Registration and Title with “Lemon Law Buyback”
- Attach a decal to the vehicle, which reads “Lemon Law Buyback” affixed to either the left door frame, frame of the major entry into the vehicle or the left side of a vehicle without doors, such as a motorcycle.
When a Dealer sells a Lemon Law buyback vehicle, they must notify the buyer on letter-size paper of the following:
- The year, make, model, and vehicle identification number
- That the vehicle title is marked “Lemon Law Buyback”
- The nature of each nonconformity reported by the vehicle’s original buyer or lessee
- Any repairs made to the vehicle in an attempt to correct each nonconformity
Repair Agreements go by many names including auto service contracts, vehicle service contracts, extended service contracts, extended warranties, vehicles service agreements, mechanical breakdown insurance, and others.
The most common Agreements are known as “Vehicle Service Contracts” and legally known as “Vehicle Service Contract Providers,” or “VSCP’s.”
The VSCP contract company must hold a special license from the California Department of Insurance to sell service contracts in California and meet many requirements.
A VSCP may be under the same ownership as the car manufacturer or a completely independent company.
Only car dealers may legally sell a Vehicle Service Contract. Companies selling VSCs over the Internet directly to consumers are breaking the law, and can be charged with a felony
Dealers must add a “Service Contract Disclosure” to the Conditional Sales Contract and have it signed by the Purchaser:
“The service contract you are purchasing is not provided or backed by the manufacturer of the vehicle you are purchasing. The manufacturer of the vehicle is not responsible for claims or repairs under this service contract”
Signature of Purchaser