Have you ever wondered what happens to lemon vehicles after they are bought back by the manufacturer? Some get what is called a branded title; the title is tagged, in this case, with the designation “lemon,” meaning it was bought back due to an unfixable issue. Some of these cars are later fixed, and resold to dealers.
If you’re a dealer or a private individual who sells former lemons, you know that these cars do take a hit on their resale value. Even if you have sold former lemons before, it’s helpful to review key selling points to ensure as transparent a sale as possible.
We’ll start with defining what a lemon vehicle is. Then we’ll move into how they’re acquired, some verification processes to use to check the car’s history, and how it all ties together to affect resale value.
And, if you’re a novice lemon buyer thinking you’ll flip a discounted car fast, read on to learn some cautionary tips!
What is a Lemon Vehicle?
A lemon vehicle is defined as one that exhibits a substantial defect that severely impacts its use, value or safety. Each state’s lemon laws generally start with that principle, and then vary, with different mileage, reporting periods, and coverage differences. Federal law provides the Magnuson-Moss Warranty Act. This is a consumer law covering all products with warranties, and which a lemon law attorney can use alone or in conjunction with state lemon laws, to protect clients’ rights.
The final outcome in a lemon law case is often the manufacturer reclaiming the defective vehicle, and repairing it for resale.
Good question: You might then ask why couldn’t the manufacturer repair the car for the consumer, but can do so later? That’s due to many factors, including a defined number of repair attempts the manufacturer gets (per state law). The consumer is not made to wait indefinitely while the manufacturer tries to repair the vehicle. Also, it could be that the manufacturer can finally get adequate parts, or suddenly discover what caused the car’s problem. In the end, the consumer is let off the hook in a prescribed period of time. The manufacturer can later repair the car and sell it, although at a discounted price due to its being labeled a lemon.
What Happens to Lemon Vehicles After the Manufacturer Repairs Them?
After the manufacturer completes the repairs to conform the vehicle to original warranty status, the vehicle can be resold. The manufacturer is required to disclose that the vehicle was a lemon law buyback and that the defects causing it to be a lemon were repaired. The car is required by some states to be labeled as a “manufacturer buyback” or “lemon law buyback.”
For more information on arbitration and other frequently asked lemon law questions,click here.
Often, dealers will buy lemon vehicles from wholesalers or auctions, and due to their lemon status, they can buy these cars at a significant discount. What happens next depends on the state:
- In states where title branding is required, the dealer selling the former lemon is legally obligated to identify it to buyers as a former lemon.
- In states where title branding is not required, other state consumer laws may make it mandatory for dealers to disclose that a car is a former lemon. Good business ethics would dictate that if a dealer knows a car is a lemon (to the best of their ability to discover through available data), then they are supposed to disclose that fact to buyers.
While some states require this title branding and others don’t, history reports can pull data from other sources, not just state DMVs. That means anyone trying to hide a lemon’s history in a state that doesn’t brand a title, might get caught. As to the vehicle’s current status, it was classified a lemon at one time, but was then repaired, to function properly now. The lemon label remains on the title as a caution to buyers about the vehicle’s history.
Dealers can cross-check vehicle histories with various services if a state doesn’t require title branding.
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Lemon Vehicle History Verification Services
State lemon law disclosure requirements vary, but to conduct ethical transactions, it’s important to be upfront about the vehicle’s history. While the buyer can conduct their own history searches, the dealer can be proactive and provide reports from services like CARFAX or AutoCheck. It’s a good idea to have these printed out and to review them before selling the car, to have the documentation to back up the price the dealer wants to charge.
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Resale Price Considerations
A branded “lemon” title can drastically reduce a vehicle’s value. On average, a car with a lemon title sells for 15% to 30% less than a non-lemon. Sometimes, the price reduction can be up to 40%. Buyers may shy away from lemon cars, and they can be a challenge to sell unless they are a desirable model, regardless of their current condition. The dealer, to provide the ultimate in transparency, can indicate to the buyer that the repairs do not guarantee that the vehicle will be problem-free in the future.
Lemon laws are confusing. Read our guide to the lemon law complaint process.
Warranty Status Transparency and Resale Pricing
How might a dealer approach the sale? They can be upfront on all warranty matters, especially pointing out if the car is still covered under the original manufacturer’s warranty. If it isn’t, the dealer could offer the car at an initial discount (which is subject to negotiation). They can also provide an extended warranty, to have a better opportunity to sell at a good price.
Note: Private sellers sometimes sell lemon vehicles, too. These are usually “as is” sales and are not covered by state lemon laws. Even so, it is ethical to provide full disclosure and not intentionally conceal a vehicle’s condition. A private seller will need to be prepared to discount the price and negotiate it, as the lemon brand will never go away, no matter what repairs have been done to the car later.
It can be enticing to buy a former lemon for a low price, but when an individual tries to resell it, there’s a lot of competition out there that people can choose from. It can be hard to resell a previous lemon vehicle unless it is a rare or sought after model.
Contact Allen Stewart, P.C. Should You Have Issues with a Former Lemon Vehicle
Dealers (and private sellers, too), usually discount the price of a former lemon vehicle. What the consumer is buying is a repaired lemon made to conform to the original manufacturer’s warranty. The warranty status of the repaired lemon, as we mentioned, can vary.
What Protections Do Consumers Have When Former Lemons Malfunction Again?
What is unknown is, even with repairs and a new dealer’s warranty, will the vehicle have problems again? You may indeed have issues with your repaired lemon car. The experienced lemon law attorneys at Allen Stewart, P.C. can help you determine if, and what, recourse you have under state or federal law.
With years of experience winning lemon law cases across the country, our attorneys provide the best avenue to pursue compensation. We can determine if your state has used car lemon laws, and potentially pursue a claim via that process. If you should experience a breach of warranty situation, a claim may be potentially pursued via the aforementioned federal Magnuson-Moss Warranty Act.
The complexities of lemon law require an attorney who can protect your rights. With all the variables in play with former lemon vehicles, you need the skill and expertise that our attorneys provide. Take advantage of our free case evaluation today, by calling 866-440-2460 to schedule an appointment, or contact us online.