Certified Auto Warranty

California Lemon Law

Summary of the California Lemon Law

Overview

The Song-Beverly Consumer Warranty Act and the Tanner Act constitute the California lemon law.[1] The Song-Beverly Act applies not only to automobiles, but also to other consumer products. The Tanner Act applies solely to motor vehicles and contains the presumptions. Under the California lemon law, if a manufacturer cannot correct a vehicle's problems after a reasonable number of repair attempts, it must replace the vehicle or refund the price paid for the vehicle, whichever remedy the consumer chooses.

Application

The California lemon law applies to cars, vans, pickup trucks, sport-utility vehicles, motorcycles, and motorhomes.[2] The California lemon law provides protection for both consumers and businesses that do not have more than five vehicles registered in California. The California law may be applied to both new and used vehicles that are still under the manufacturer's warranty at the time of the sale or lease.[3]

Reasonable Number of Repairs

The California lemon law requires a manufacturer to repurchase or replace a vehicle if (1) the vehicle has a defect or condition that was reported to the manufacturer or dealer, (2) the defect or condition continues to exist, and (3) the new motor vehicle was subject to "a reasonable number of repairs."

The Tanner Act provisions, which apply only motor vehicles, contain the presumptions. The California lemon law has three presumptions regarding what constitutes a reasonable number of repairs. First, a vehicle is presumed to be subject to a reasonable number of repair attempts if the same nonconformity (or defect) that is likely to cause death or serious bodily injury has been subject to repair two or more times and the buyer has directly notified the manufacturer of the need for repair. Second, a vehicle is presumed to be subject to repair a reasonable number of times if the same nonconformity has been subject to repair four or more times and the buyer has directly notified the manufacturer of the need for repair. Third, a vehicle is presumed to be subject vehicle has been subject to a reasonable number of repair attempts if the vehicle has been out of service more than 30 calendar days and the buyer has directly notified the manufacturer of the need for repair. In addition, these repair attempts must occur within 18 months from delivery or 18, 000 miles, whichever occurs first.

However, a consumer need not proceed under the Tanner Act provisions. A consumer may pursue a claim under the general Song-Beverly Act provisions. Although a consumer would not have the benefit of the presumptions, a consumer could still argue that a vehicle has been subject to a reasonable number of repair attempts based on the specific circumstances involved. In other words, a consumer may be able to prove that a vehicle has been subject to a reasonable number of repairs even if one of the presumptions has not been met, for example, if the vehicle has been subject to repair for the same nonconformity three times or out of service 29 days. The proof of such a claim without the presumptions would be similar to proving a claim under the federal Magnuson-Moss Warranty Act.

Substantial Impairment

The California lemon law defines "nonconformity" as a defect or problem that "substantially impairs" the use, value, or safety of the vehicle to the buyer or lessee. This term means that a consumer must show that his or her vehicle is exhibiting significant, not trivial, problems. California appellate courts have ruled that "substantial impairment" is determined based on what a reasonable consumer would understand to be a defect, but the test is applied to the specific circumstances of the individual buyer.[4]

Notification of the Manufacturer

Direct notification of the manufacturer is required only if the manufacturer has clearly and conspicuously disclosed to the buyer in the warranty or owner's manual. The notification must be sent to the address, if any, listed in the warranty or owner's manual.

Remedies

Lemon laws usually provide two remedies: (1) repurchase of the vehicle (restitution) or (2) replacement of the vehicle. The restitution remedy allows a consumer to undo the sales contract and recover the purchase price of the vehicle. (The repurchase calculation is discussed below). The replacement remedy allows a consumer to exchange the defective vehicle for a new comparable vehicle. However, a buyer cannot be forced to accept a replacement vehicle.

Repurchase Calculation

a. Usage Deduction

The California lemon law allows manufacturers a usage deduction for miles on a defective vehicle prior to the first repair attempt. The statute provides a formula for determining the usage charge:

When a vehicle is replaced, a consumer may be required to pay this usage charge. When a vehicle is repurchased (restitution), a manufacturer may deduct the usage amount from the buyer's refund.

b. Attorney fees

c. Penalties

The California lemon law allows consumers to recover a civil penalty if a manufacturer willfully fails to comply with the requirements of the statute. The penalty permits a consumer to recover a maximum of two times the amount of the buyer's actual damages.

Defenses

Manufacturers may assert a number of defenses to claims under the California lemon law. Therefore, a manufacturer can avoid liability under the lemon law by showing the defect or condition complained of does not substantially impair the use, value, or safety of the vehicle, resulted from abuse or lack of maintenance, or is related to a non-manufacturer's or aftermarket component.

Arbitration/Dispute Resolution Process

If manufacturers timely notify buyers of third-party dispute resolution processes or arbitration programs, then the presumptions above are not available to buyers who do not first resort to the dispute resolution or arbitration process. An arbitration requirement is usually set forth in a vehicle's warranty booklet or owner's manual. The arbitration decisions are not binding on the buyer, but they are binding on the manufacturer if the buyer accepts the award. Therefore, a buyer may pursue a lemon law claim through the court system if dissatisfied with the arbitration result. After a buyer has satisfied this "prior resort" requirement, he or she may assert the Tanner Act presumptions in a lawsuit. However, if a buyer does not plan to rely on the presumptions, he or she need not submit a claim to an arbitration program. The State of California maintains a list of state-certified arbitration programs. If the arbitration program is not certified by the state, then a buyer is not obligated to submit a claim to the program.

Lemon Laundering

Lemon laundering refers to the practice of selling repurchased or "lemon" vehicles without disclosing the vehicles' problems or the fact that the vehicles were repurchased. California, however, has strict provisions that attempt to prevent lemon laundering. The Automotive Consumer Notification Act requires the title of a repurchased vehicle to be branded that it was repurchased due to a manufacturer's defect, the provision of a warranty buyback notice to the consumer, and the placement of a decal on the vehicle indicating that it was repurchased because of a manufacturer's defect. The warranty buyback notice discloses the defects reported by the original owner or lessee as well as the repairs performed in an effort to correct the problems reported by the original owner or lessee. Additionally, the warranty buyback notice must be signed by the buyer prior to the sale of a lemon vehicle.

Tips for Consumers

Report defects as soon as they arise.

Insist on receiving a repair order each time a vehicle is delivered for repair.

Save copies of all repair orders.

Read the warranty booklet or owner's manual for notification addresses and informal dispute settlement requirements.

Notify the manufacturer of the defect in writing by return-receipt mail, if written notification is required.

Contact the California attorney general or consumer affairs department for information on a specific state's lemon law requirements.

Contact an attorney for a determination of whether you have a claim.