2020Directory_FNL_FlippingBook

A common misconception concerns the concept of a warranty versus an “extended warranty” or service contract. For a new car, a warranty is included in the vehicle price and it provides the customer a right from themanufacturer to obtain certain repair services that must be adequately described under MMWA. Manufacturer warranties do not cover aftermarket products such as dealer-added equipment. Some vehicle manufacturers permit transfer of unexpired warranties to subsequent purchasers, and state laws restrict or limit any charges that can be imposed for doing so. Used car dealers can also provide warranties for the vehicles they sell, but a dealer cannot charge a customer for a warranty; it must be included in the cost of the vehicle. If the customer pays separately for additional coverage or an “extended warranty,”that is a “service contract.” An“extended warranty”is somewhat of a misnomer. Any product that provides for repair or servicing of the vehicle after the original manufacturer’s (or seller’s) warranty expires and for which the customer pays an additional charge is generally deemed to be a “service contract,” not a warranty. Service contracts can be sold directly by the dealer or by a third party. They do not extend the manufacturer’s warranty obligation but give the consumer a contractual right against the seller of the service contract in the event of a breakdown or service need. Under MMWA and state law, a consumer’s legal rights and remedies will be different for warranties and service contracts. Some states require implied warranties in any vehicle sale. Other states permit “as is” sales of used cars. Used car warranties and the availability of a manufacturer’s warranty must be disclosed in the Used Car Buyer’s Guide discussed earlier in this Topic. In 2015, President Obama signed the E-Warranty Act which does away with a requirement that has been on the books since passage of the Magnuson-Moss Warranty Act of 1975, which compelled manufacturers to include warranty terms on a single printed document on or within packaging of products costing more than $15. The E-Warranty Act now permits, but does not compel, manufacturers to avoid the requirement by directing consumers to their websites to find the terms and conditions of their consumer warranties. Pursuant to the FTC’s rules implementing the E-Warranty Act, which took effect October 17, 2016, if a warrantor or seller opts to post warranty terms electronically, the warrantor or seller must: (1) provide consumers the Internet address of the website where the warranty terms can be reviewed; (2) provide a non-Internet based method, such as a phone number or mailing address, for consumers to request the warranty terms; upon request, the warrantor must provide the warranty terms promptly and free of charge; (3) ensure that all required warranty terms are posted in a clear and conspicuous manner and that any limitation on implied warranties appears in close proximity to the location where the text of the warranty terms begin; and (4) ensure that warranty terms remain accessible to the consumer on the warrantor’s website. FTC Warranty Rules Two additional FTC rules, the Consumer Product Warranty Rule (Warranty Rule) and the Rule Governing Pre- Sale Availability of Written Warranty Terms (Pre-Sale Availability Rule), specify language for warranties, require that warranties be displayed in close proximity to the vehicle, and the full warranty terms be made available to consumers upon request before they buy. State laws, such as the California and Minnesota Car Buyer’s Bill of Rights, provide minimum requirements for dealers to be able to use the term “certified” (or any similar term) in connection with a used car sale, and require other warranty and used car disclosures as well.

HOT TOPICS

173 2020 MEMBERSHIP DIRECTORY & SERVICES GUIDE