For California businesses, particularly those who sell automobiles and small trucks, the legal landscape can be a proverbial mine field, with multiple consumer law provisions – some of which sometimes appear to conflict with each other. Step on one incorrectly, and it explodes.
Retail businesses must be particularly familiar with the Song-Beverly Consumer Warranty Act (“Warranty Act”). While the Warranty Act isn’t just limited to the sale of motor vehicles – it applies to all consumer goods sold at retail in the state of California that are covered by express or implied warranties – it seems to impact auto dealerships more than other types of businesses.
Warranty Act’s General Provisions
The Warranty Act does not apply to all auto sales. There are some specific requirements:
• Generally, there must be a written warranty. The automobile manufacturer may provide the warranty. It can also be provided by the dealer itself, particularly with regard to used cars.
• The vehicle must generally have been purchased for “personal, family, or household purposes.” The dealer should recognize, however, that many small vehicles that are used in businesses still fall within the terms of the Warranty Act. A dealer ordinarily cannot defend a Warranty Act claim on the grounds that the vehicle has been used for some business purposes.
• The consumer must have given the manufacturer, or the manufacturer’s representative, a “reasonable number” of opportunities to fix the problem(s) with the vehicle. The “reasonable” number depends upon the circumstances. Generally, where the alleged defect involves safety equipment, such as the brakes, fewer attempts to resolve the issue are allowed. Some experts say that the dealer gets two chances to fix a safety issue; there is no such legal rule, however. Where the problem is less serious, “reasonable” could mean multiple attempts to fix the issue.
• The number of days that the vehicle has been out of service is also important. If the vehicle was out of service by reason of warranty repairs for a total of 30 days within the first 18 months or 18,000 miles, whichever comes first, then there is a presumption that that the vehicle is defective under the terms of the Warranty Act.
• The warranty issue must substantially impair the vehicle’s use, and value of safety.
The Dealer May Have to Repurchase Vehicle
If the purchaser establishes that the vehicle does not meet the standards of the Warranty Act, the manufacturer, or its representative, may be required to replace the vehicle or return the purchase price to the buyer (or lessee). “Purchase price” must include the price paid for manufacturer-installed items. It need not include the price paid for non-manufacturer items installed by the dealer.
The Buyer May Be Charged For Use of Vehicle
Under the Warranty Act, the buyer (or lessee) may be charged for the use of the vehicle, regardless of whether the vehicle is replaced or the purchase price is refunded. Generally, that charge is based upon the percentage of miles that the vehicle has traveled before it was first brought in for correction of the problem. Vehicles are assumed to have a life of 120,000 miles. Thus, if the car had been driven 10,000 miles before it was first brought in for correction of the problem, the buyer could be charged 1/12th (10,000/120,000 = 8.333 percent) of the purchase price for usage.
Warranty Act Has Other Important Provisions – Legal Counsel is Key
The Warranty Act has a number of other important provisions that should be considered by any automobile dealership. For example, it allows an award of attorney’s fees to the consumer, in some instances. While California law is generally “consumer friendly,” particularly when an aggressive consumer’s attorney represents the consumer, your business is not without power of its own. CKB VENNA LLP has a long history of representing clients in all phases of business litigation, including vigorous representation of dealers and other automotive businesses regarding alleged violations of the Song-Beverly Consumer Warranty Act and California’s Consumer Legal Remedies Act. Our team understands the complexity of the issues, and stands ready to assist your business. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us today by telephone at 909-980-1040, or complete our online form.