The Federal Trade Commission's Southwest Region Office has warned 11 used car dealerships in Jonesboro, AR, that their sales practices violate the FTC's Used Car Rule, which requires used car dealers to display a "Buyers Guide" detailing warranty and other important information on the cars they sell.
On the surface this may not seem like a big deal, but it really is. Unfortunately there are those consumers who are not savvy about their rights when it comes to buying used cars from dealers. Not knowing basic warranty information could prove problematic if problems develop.
How so? The dealerships could claim there were no warranties for the used cars they sell. That's not true because the Federal Trade Commission has well-defined regulations for used car warranties.
FTC staff inspections in Jonesboro found that eight dealers failed to display Buyers Guides on almost all used cars offered for sale, and three dealers failed to display the guides on a significant number of used cars. Ten dealers properly displayed the guides on all or nearly all of the used cars offered for sale. The FTC sent warning letters urging the 11 dealers to come into compliance by properly displaying the guides in a clear and conspicuous location on all used cars.
"We are glad to see that a significant number of used car dealers in Jonesboro, Arkansas, are in substantial compliance with the Used Car Rule by properly displaying Buyers Guides on their used cars offered for sale. We believe these rule requirements are important to consumers in determining to purchase a used car," said Deanya Kueckelhan, Director of the FTC's Southwest Region, in a news release announcing the crackdown. "We hope the rest of the Jonesboro's used car dealerships will be in full compliance shortly."
The inspections were part of the FTC's ongoing efforts to enforce the rule, in conjunction with state and local officials. The FTC has brought more than 80 actions since the Rule took effect in 1985, with civil penalties totaling more than $1 million. Hundreds of state actions also have been brought to enforce the rule.
The Used Car Rule requires that Buyers Guides be displayed at all times on each vehicle offered for sale, stating:
- Whether the vehicle comes with a warranty and, if so, whether it is a "full" or limited warranty;
- Which systems are covered by the warranty and the duration of the warranty period;
- If it is a limited warranty, what percentage of the cost for covered parts and labor the dealer will pay for;
- Whether the car is sold with no written or implied warranty or, in other words, the car is sold "As Is;" or
- Whether the car is sold with no written warranty, but with implied warranties. (Some states and Washington, D.C. do not allow dealers to sell cars without implied warranties.)
There's a reason that dealers like to be vague about warranties: the expense. It costs money to make repairs. Dealers can sell a used car for a higher profit if they don't have to be bothered with the potentially profit-sapping move of honoring warranties.
Buyers should absolutely refuse to pay full value for any used car sold by a dealer without some explanation of the available warranty. Offer to pay the private party value instead. Private parties sell used cars for less because they're not bothered by regulatory requirements.
The rule also provides that the Buyers Guide becomes a part of the sales contract and overrides any contrary provisions contained in the contract. It also contains important warnings and suggestions for consumers, such as asking the dealer if they can have a mechanic inspect the car they are considering.
The Buyers Guide warns consumers not to rely on spoken promises, which may be impossible to enforce. Instead, consumers should ask the dealer to put any promises in writing on the Guide and in the sales contract. Verbal contracts can be enforced but it extremely difficult and could involve lengthy court action. Stick to written contracts.
So, for those of you who want less government regulation, consider that sometimes it can be a good thing. A federal Buyers Guide requirement is important, especially as it becomes easier to buy used cars across state lines. Requiring consumers to be familiar with every law in every state would lead to more widespread consumer fraud.