Used Car Purchases: What to do When Your Car Doesn't Work Properly
by: Northwest Justice Project
Introduction
What can you do if your used car breaks down or needs costly repairs soon after purchase from a car dealer? This publication talks about some state and federal laws that may help. If you want to do more research, some of these laws are listed at the end of this publication.
An important note: You do not have a right to return a used car and cancel the sale simply because you have changed your mind. Laws for some sales give the buyer this right, but there is no "cooling off" period after you buy a car. Once you sign the contract, the car is yours.
The car dealer did not offer any warranties (guarantees) on my used car. Does this mean that my car is not covered by any warranties even if it develops major problems soon after I bought it?
No. Every used car sold by a dealer in Washington has an "implied warranty of merchantability."
What is an implied warranty of merchantability?
It is a warranty that gives you the right to expect that your car will be:
- fit for ordinary driving purposes for a reasonable time
- reasonably safe and without substantial defects
- of the average quality of similar cars sold under similar conditions by other sellers in the same price range.[1] (In other words, an older car sold for $1,000 is not expected to have the same qualities as a newer car sold for $10,000.)
Problems that you should have noticed when you looked at the car (for example, a bald tire) or took it for a test drive are not covered.
Is there a checklist I can use to see if my car problems are covered by an implied warranty?
No. What is acceptable quality for one used car may be unacceptable for the next. Some of the factors that can be taken into account are:
- the price you paid for the car
- the car's age
- the car's mileage
- the kinds of problems you are having
- when these problems occurred
Some examples of when courts have decided that problems were covered by an implied warranty are given at the end of this publication..[2]
A sticker on the car stated the car was being sold "as is" and the sales contract seems to say I waived (gave up) all warranties. Have I given up my right to an implied warranty of merchantability?
No. Neither a sticker nor a clause in your contract waives this warranty. Even if the car was sold "as is," the implied warranty of merchantability can only be given up if two conditions are met:
- First, you and the dealer must have expressly negotiated the waiver and reached an agreement that your car does not come with an implied warranty.
- Second, the dealer must give you a statement of the particular characteristics or parts of the car which are not being warranted.[3]
Because dealers rarely meet both conditions, most used cars have an implied warranty of merchantability.
The dealer sold me a service contract. Does this mean I waived the implied warranty?
No, the implied warranty is not waived if the dealer sold you a service contract within 90 days after you bought the car.[4] Sometimes service contracts are worth the extra money, but too often they're not. If you can't use your contract to get the repairs you need done, you may be able to claim that those same repairs should be covered by an implied warranty.[5]
What can I ask the car dealer to do?
You can ask the car dealer to repair your car or pay to have it repaired. If the dealer won't make all repairs free of charge, you might consider proposing a compromise. A compromise solution might not be ideal, but it will be faster, and may even be better, than the other choices.
Any agreement you reach with the dealer should:
- be in writing
- say who will do the repairs
- say what the repairs will be
- say what your cost will be if there is a cost to you
Be careful, however, about bringing the car in if you owe the dealer money (on a down payment or on your monthly payments). We have heard of dealers refusing to return a car unless these payments are made.
You can ask the dealer (and your lender if you applied for your loan at the car dealer's business) to cancel the contract, take back the car, and refund your money, but dealers (and lenders) usually don't agree to cancel a sale.
What rights do I have with a lender?
If you applied for your car loan at the car dealer's place of business, the lender is in the same position as the dealer. Under federal law the lender is liable (responsible) for any claims or defenses that you have against the dealer. This law applies when the loan papers have been given to another lender and when the lender is someone with whom the car dealer regularly does business.[6]
If you got the money to buy the car from your bank or credit union, neither the bank nor credit union is liable for any claims you have against the car dealer.
Is there someone who can help me resolve my dispute with the used car dealer if I can't resolve it myself?
Yes. You can seek help from one of the Consumer Resource Centers of the Attorney General's Office (locations are listed at the end of this publication).[7]. If you file a complaint, they may be able to mediate your dispute with the car dealer.
You can also contact your local Better Business Bureau, find out if a mediation service is offered by your local city or municipality, or try a local Dispute Resolution Center. For more information about using mediation as an alternative to going to court, see our Mediation publication.
I tried mediation, but my problem is still unresolved. What can I do?
You can sue in Small Claims Court for up to $4000. Small Claims Court is informal and lawyers are generally not allowed.
Your damages are the difference in the value of the car you got and its value as warranted.[8] Repair costs are often used as another way to measure damages.[9] For more information about how to use Small Claims Court, see our Small Claims Court publication.
If you are suing for more than $4000, you must sue in District Court or Superior Court. You will probably need to hire a lawyer. Therefore, if your damages are slightly more than $4000, it often makes sense to take the loss and sue for $4000 in Small Claims Court.
If your sales contract or loan document has an "arbitration" clause, read the next section.
What if my sales agreement or loan agreement has an "arbitration" clause?
Sales agreements and loan agreements often have an arbitration clause. This clause may require you to take any disputes you have with the car or lender to arbitration instead of going to court.[10] Arbitrators are people who are selected to hear both sides and come to a decision. The hearings take place in private settings and are less formal than court hearings.
Decisions made by arbitrators are legally binding. If you lose at your arbitration hearing, you will not be able to start a lawsuit over the same dispute.
Arbitration fees vary, but are much higher than small claims court fees. Be sure you understand your responsibility for filing fees and the cost of the arbitrator. Some arbitration clauses give the winning side (the "prevailing party") reasonable attorney's fees. If your case goes to arbitration and you lose, you may have to pay these costs.
Arbitration clauses are not always effective to prevent someone from pursuing a case in court. Courts have refused to uphold arbitration clauses that are very one-sided or unfair.[11] If you want your dispute resolved in court instead of arbitration, you will have to convince the court to find your clause invalid.
Can I get a court order that requires the car dealer to make specific repairs?
You can't sue in Small Claims Court to get the car dealer to make specific repairs.
You can try to get this order in other courts, but courts don't often give them, it would take time, and you would need a lawyer to help you.
What should I do if I want to cancel the contract, return the car, and get my money back?
Send a timely notice that revokes your acceptance of the used car sale.[12] This notice must be sent within a reasonable time of when you discovered or should have discovered the problems with the car.
If you paid cash for the car, send the notice to the dealer. If you borrowed money to buy the car and applied for your car loan at the dealer's place of business, also send the notice to the lender.[13] Keep a copy of the notice.
Offer to return the car in exchange for a refund of the money you've paid and a cancellation of the contract (and loan agreement).
If the dealer (or lender) is not willing to cancel, you will have to take your case to court (or to arbitration if your sales contract or loan agreement provides for it). You will be responsible for convincing the judge or arbitrator that you rightfully revoked acceptance of the sale and that the contract should be cancelled.[14] Going to court or arbitration is usually difficult if you do not have an attorney to represent you. It is never easy to get a contract cancelled and the dealer and lender will probably have lawyers.
You cannot sue to cancel the contract in Small Claims Court.
What should I do to prepare for trial if I decide to sue in Small Claims Court?
First read the "How do I Prepare for Trial?" section in our Small Claims Court publication. That section contains practical suggestions and tips that you will find useful as you prepare your case.
Important papers and documents you should bring to court include:
- your sales agreement
- loan agreement
- photographs of the car's condition
- repair bills or written damage estimates
- any letters you have sent the dealer or lender concerning the problems you've had with the car
- any document you think you might need. (You can always decide not to use a document you've brought to court, but you can't have the court consider anything you've left at home.)
Contact mechanics who have looked at your car and would be able to support your case, and ask them to appear at the trial. You may need expert testimony about the value of your car for the court to determine the appropriate amount of damages.
If I have paid to have repairs done, can I deduct the cost from my car payments instead of going to court?
Yes, but this "self-help" strategy is dangerous and not recommended. You must be able to hold the lender liable for any claims you have against your car dealer (as explained in a previous section) and you must give notice that you intend to deduct the cost of repairs from your payments.[15] As soon as you give this notice you can expect a strong response from your lender.
First, if your car loan gives your lender a security interest in the car (most car loans do), your lender may try to repossess the car or sue to get it back as soon as you miss a payment.
Second, if your loan gives your lender the right to say the whole loan is due if you miss a payment (most car loans do), the lender might accelerate the loan by consider the entire amount you borrowed due.
Third, if the lender starts a lawsuit or files for arbitration, you are gambling that a court or arbitrator will agree that the implied warranty of merchantability applies to your case and with your calculation of damages. If the court or arbitrator rules against you, not only do you lose the car, you also may end up owing money on the loan, the lender's costs, and attorney's fees.
What should I know about the risk of repossession if I deduct the cost of repairs from my car payments?[16]
Your lender does not need to get court permission to repossess your car and does not have to notify you that a repossession is about to take place. Once the car is repossessed, the burden is on you to sue to get it back and convince the court that you were entitled to withhold payments. (You cannot sue for the return of the car in Small Claims Court.)
Although your lender cannot threaten you with bodily harm or break into a locked garage, the repossession will be lawful as long as it does not "breach the peace."[17] It does not breach the peace if you are not present or do not object before the repossession takes place. Repossessions often take place during the night, with cars being towed away while parked on the street or even a driveway.[18]
If you have withheld payment, do not turn your car over to the car dealer or anyone else the lender would know for repairs. Be careful about leaving your car where the lender can expect to find it. Leave as little personal property as possible in the car.
What will happen if my car is repossessed?
Your lender will sell the car, usually for much less than what the car is worth, and apply the sale price to what you owe. The lender can charge you for the costs of repossessing your vehicle and preparing it for sale. It can also sue you for the amount it claims is the difference between what you still owe on the loan and the sale price of the car.[19]
What else can I do besides the options you've already described if I don't want to keep the car and don't want to continue making payments on it?
You might want to turn the car in voluntarily to the lender in return for a written agreement that says you do not owe anything else on the loan. If you are already behind on your payments, do not bring the car with you to your lender's place of business before you have a written agreement for its voluntary return.
Your lender may agree to this proposal (but often won't) because it saves the time and cost of repossessing the car, because it might not be entitled to receive more from you because your car had serious defects, or because you don't have the types of income and property the lender can lawfully take even if it wins. To learn what types of income and property you can protect, see our Debtor's Right in a Lawsuit publication.
Final Thoughts
We realize that you may have strong feelings about how your case should be resolved. At the same time, it is very important for you to carefully look at the risks of taking certain actions (such as withholding car payments or canceling the contract) before taking them. Do not take these steps unless you are also prepared to justify them before a judge or arbitrator.
Footnotes:
- RCW 62A.2-314
- Testo v. Russ Dunmire Oldsmobile, Inc. 16 Wn.App. 39 (1976) (overheating and starting problems three hours after sale/car not drivable due to internal engine damage); Faulkingham v. Seacoast Subaru, Inc., 577 A.2d 772 (1977) (car needed to be repaired six times during the first two weeks); Ismael v. Goodman Toyota, 417 S.E.2nd 290 (1992) (car returned for repairs six times in six months and driven only 700 miles before it was said to not repairable).
- Testo v. Russ Dunmire Oldsmobile, Inc., 16 Wn.App. 39 (1976).
- RCW 48.96.045(4)
- This publication does not address the difficulty of getting repairs done or pursuing claims based on a service contract.
- 16 C.F.R. § 433. Your loan papers should contain the following provision in bold face type: "Any holder of this consumer credit contract is subject to all claims and defenses which the debtor could assert against the seller of good or services obtained pursuant hereto or with the proceeds hereof. Recovery hereunder by the debtor shall not exceed amounts paid by the debtor hereunder." If this provision is absent from your loan agreement, state law treats it as if it was present. RCW 62A.9A-403(d) and 62A.9A-404. See also RCW 63.14.020 and RCW 63.14.150.
- Bellingham (360-738-6185) (Island, San Juan, Skagit and Whatcom Counties)
Kennewick (509-734-7140) (Southeastern Washington)
Seattle (206-464-6684) (North King, Snohomish, Clallam and Jefferson Counties and Bainbridge Island)
Spokane (509-458-3548) (Eastern Washington)
Tacoma (253-593-2904) (Pierce, Mason, Grays Harbor, Kitsap, and South King County)
Vancouver (360-759-2150) (Clark, Cowlitz, Pacific, Skamania, Wahkiakum, Lewis, and Thurston Counties)
- RCW 62A.2-714(2)
- Federal Signal v. Safety Factors, 125 Wn.2d 413, 440 (1994).
- State laws on arbitration can be found at Chap. 7.04 RCW.
- Luna v. Household Finance Corp. III, 236 F.Supp.2d 1166 (W.D. Wash. 2002).
- RCW 62A.2-607
- 16 C.F.R. § 433
- RCW 62A.2-607(4)
- RCW 62A.2-717
- Repossession is not just a serious threat if you are withholding payments. It is a serious threat no matter why you have missed some of your car payments.
- RCW 62A.9A-609 (b)(2)
- Ragde v. Peoples Bank, 53 Wn.App. 173 (1989).
- RCW 62A.9A.608 - .616
This publication provides general information concerning your rights and responsibilities. It is not intended as a substitute for specific legal advice.
This information is current as of the date of its printing, December 2005.
© 2005 Northwest Justice Project.
1-888-201-1014, TTY 1-888-201-9737
(Permission for copying and distribution granted to the Alliance for Equal Justice and individuals for non-commercial use only.)
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