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What Is the Lemon Law – Implied Warranty for Defective Cars & Products

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Buying a new car is one of the most exciting purchases you’ll ever make. There’s nothing quite like the thrill of driving home in a beautiful, showroom-perfect vehicle, particularly if you’ve been driving nothing but old clunkers for most of your life. The shiny finish, the high-tech features, that magical new-car smell – for the first few weeks, all you want to do is bask in the glow.

But that glow starts to fade pretty quickly if your beautiful new car ends up in the shop with a major problem before the new-car smell has even worn off. And it disappears completely if you fix that problem, only to have it pop up again and again, until your expensive new car is spending more time in the shop than it does on the road.

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A car with major problems that can’t be fixed is called a lemon, and it certainly can leave a sour taste in your mouth. Fortunately, if life hands you a lemon, there’s a way to make it into lemonade. All 50 U.S. states have “lemon laws” to protect new car buyers – so if you ever end up with a lemon, your state’s lemon law can help you get a refund or a replacement for it.

Federal and State Lemon Laws

The first lemon law passed in the United States was the Magnuson-Moss Warranty Act, also known colloquially as the federal lemon law. Under this law, if a manufacturer offers a warranty on a product – any product, not just a car – then the manufacturer is obliged to fix it “within a reasonable time and without charge.” If the product can’t be fixed after several attempts, then the manufacturer must either replace it or refund the buyer’s money.

This law isn’t limited to products that have a written warranty. In most states, products also come with an “implied warranty” – a promise that a product can do what it’s supposed to do. So if you buy a refrigerator and it doesn’t get colder than room temperature, then even if there was no written warranty on the fridge, its maker has violated the implied warranty. However, if a seller says that a product is being sold “as is,” specifically admitting that there may be something wrong with it, then there is no implied warranty, and the law doesn’t apply.

After the passage of the Magnuson-Moss Warranty Act, states across the country went on to write their own lemon laws that provide more specific protections for car buyers. Each state’s law is slightly different.

For instance:

  • Some state lemon laws apply only to new cars, while others cover secondhand and leased cars
  • Some states make the auto manufacturer responsible for repairing or replacing a damaged car, while others put that responsibility on the seller
  • Most states, but not all, say that if you have to sue a car maker for damages under the lemon law, then the manufacturer is required to pay for your legal fees if you win

You can find the details of your state’s lemon law at Lemon Law America. This website, run by a law firm that specializes in lemon lawsuits, provides the full text of the lemon laws for all 50 states and the District of Columbia.

What Qualifies as a Lemon

Not every new car that needs a repair is considered a lemon. According to the legal encyclopedia at Nolo.com, to qualify as a lemon under most state lemon laws, a car must have a “substantial defect.”

Such problems have the following characteristics:

  • Impairs the Car’s Use, Value, or Safety. Faulty brakes or steering are clearly substantial defects because they make the car unsafe to drive. Minor problems, such as a radio knob that falls off or a glove compartment that won’t stay closed, are not substantial defects. For problems in between these two extremes, like a heater that’s stuck on high, it sometimes falls to a judge to decide whether the defect is substantial.
  • Appears While the Car Is Still New. In some states, the problem must show up within a certain period of time – usually one or two years after purchase. In other states, the cutoff is based on mileage and is usually either 12,000 or 24,000 miles.
  • Isn’t Caused by Abuse. If your car’s shock absorbers keep failing under normal road conditions, the car could be a lemon. But if they keep failing because you keep running over the curb every time you park, the problem is due to abuse, and the car isn’t a lemon.

However, even a car with a substantial defect is only a lemon if the problem can’t be fixed. Before seeking relief under your state’s lemon law, you have to let the dealer or the manufacturer make a “reasonable number” of attempts to fix the car.

How many attempts is a reasonable number depends on the type of problem. Safety defects, such as brake problems, are the most serious because they can be life-threatening if they’re not fixed. In general, if the dealer can’t fix a serious safety problem on the first or second try, you can treat the car as a lemon.

For other types of problems, the dealer gets more chances to try to fix it. The number varies from state to state, but in most states it’s three or four. Also, in most states, a car can be declared a lemon if it spends a total of 30 days in the shop over a one-year period. The time spent in the shop doesn’t all have to be for the same problem, but it all has to be for serious problems that are covered under the car’s warranty.

Under Car Warranty

How Lemon Laws Protect You

If your car meets the legal definition of a lemon, then the manufacturer must either take back the car and refund your money or replace the car at no cost to you. In most states, you get to choose whether you prefer a refund or a replacement.

State lemon laws aren’t always specific about what qualifies as an acceptable replacement for a faulty car. For instance, New Jersey’s lemon law simply says that the manufacturer may “make an offer to replace the vehicle.” It doesn’t say that the replacement has to be the same make and model, or even that it has to be a car of equal value to the one replaced. However, it does say that the consumer can choose to reject the replacement car and insist on a refund instead.

In addition to the price of the car itself, some lemon laws cover other costs related to faulty cars. According to Lemon Law America, nearly all states cover the cost of your legal fees if you win a lemon lawsuit. This ensures that you’re never stuck with a lemon just because you can’t afford a lawyer to represent you. In addition, some states require the manufacturer to pay you back for money you spent as a result of driving a lemon, such as towing fees and the cost of renting a car while yours was in the shop.

What to Do With a Lemon

Each state has a different process for getting what you’re entitled to under its lemon law. However, in every state, the first step is to notify the manufacturer about your defect and give the company a chance to fix it. If the manufacturer immediately offers to take the car back and refund your money (or to give you a new car instead) your problem is solved.

If the manufacturer doesn’t offer you an acceptable deal, then in most states, the next step is to take the case into arbitration. This is a method of settling disputes outside of a court of law. Both parties in the dispute present their case to a neutral third party, called the arbitrator, and agree to let that person decide the outcome.

Arbitration is usually faster and cheaper than a lawsuit, which is why most states require it. However, if you’re not satisfied with the outcome of the arbitration, you still have the option of taking your lemon law case to court.

Arbitration

When you take a lemon law case into arbitration, the arbitrator you use often depends on the manufacturer of your car. Some car manufacturers have their own in-house arbitration programs, and others work with specific private programs. If your car manufacturer is one of them, you probably have no choice but to use its program.

However, if you get a choice, you’re usually better off choosing an arbitration program run by a consumer protection agency. Its job is to look out for your interests, not the car manufacturer’s.

One good program is BBB AUTO LINE, run by the Better Business Bureau (BBB). Many large auto makers participate in this program, which is free for consumers and simple to use.

Here are the steps in the process:

  1. Start by filing a complaint with the BBB. You can call its toll-free number or file your complaint on the BBB website. In your complaint, include the name and address of the car owner; the car’s make, model, year, and Vehicle Identification Number (VIN); and a description of what’s wrong with the car.
  2. The BBB sends a copy of your complaint to the manufacturer. This gives the manufacturer a chance to contact you to talk about a settlement. If you can agree to a settlement without any additional help, that fixes your problem.
  3. If you have trouble agreeing to a settlement, you can get a Dispute Resolution Specialist from the BBB to help you. The specialist works with you and a representative from the manufacturer to discuss the problem and help you work your way toward a solution. However, it’s still up to you to decide whether the solution is acceptable. If you reach an agreement this way, the BBB writes up a letter outlining the agreement, sends it to both you and the manufacturer, and follows up later to make sure the agreement was carried out.
  4. If you can’t reach an agreement this way, the case goes to arbitration. The BBB selects a lawyer or someone else experienced in arbitration to hear the case. If the arbitrator isn’t an expert on cars, the BBB also provides a technical expert to assist with the case. The BBB also arranges an inspection of the car, if necessary, before the arbitration hearing.
  5. You prepare for the arbitration hearing by gathering documents and witnesses to support your side of the story. Get copies of the sales contract or lease agreement for the car, the warranty, service records showing how many times you took the car to the shop, and letters or notes of phone conversations between you and the manufacturer or dealer. You can also contact possible witnesses, such as your mechanic, and ask them to either testify in person at the hearing or provide a written statement.
  6. The hearing itself is much like a court case. You can present your own case or get a lawyer to represent you. Both you and the manufacturer tell your versions of the story, present documents and witnesses to support your cases, and question the witnesses presented by the other side. The arbitrator asks questions about anything that isn’t clear. The whole process usually takes about two hours.
  7. The arbitrator makes a decision and gives it to both parties in writing, usually within three days following the hearing. However, unlike most decisions made in arbitration, it isn’t legally binding. If you agree to the decision, the manufacturer has to agree as well, and both of you must stick to it. However, you can also choose to reject the decision and take your case to court instead.

Lawsuits

If you aren’t satisfied with the result of an arbitration, you can appeal it in a court of law. However, if you do, the arbitration decision becomes evidence in your court case. Unless you can present strong evidence to show that the arbitrator’s decision was wrong, your chances of winning a lawsuit are slim.

A lawsuit is an expensive and time-consuming process. Under the Magnuson-Moss Act and most state lemon laws, the car manufacturer has to cover the cost of your legal fees – but only if you win. If you lose, you add a hefty lawyer’s bill to the money you’ve already lost trying to fix your lemon. In the end, a lawsuit could cost you more than just replacing the car outright.

For all these reasons, suing a car manufacturer is an absolute last resort. It’s always best to try to resolve your case by talking it out with the car manufacturer, and if that doesn’t work, through arbitration. If arbitration doesn’t work, you should think long and hard before risking even more money on a court case you can’t be sure you’ll win.

Lawsuit Time Consuming Process

Final Word

A final point to remember about lemon laws is that they’re not just for cars. The Magnuson-Moss Warranty Act covers all kinds of “consumer products,” which means any item you can buy for personal or household use. A washing machine, a toaster, a cordless drill, or even a pair of shoes could be a lemon.

Any time you buy any product with a warranty – whether it’s a written warranty, or just an implied warranty – you can reasonably expect it to work the way it’s supposed to. If it doesn’t, you have a legal right to have it repaired, and if it can’t be repaired, replaced. So if a store ever gives you a hard time about replacing a faulty product, try saying the words, “Under the Magnuson-Moss Warranty Act of 1975…” and see if that makes a difference.

Have you ever owned a lemon? If so, what did you do about it?

Amy Livingston
Amy Livingston is a freelance writer who can actually answer yes to the question, "And from that you make a living?" She has written about personal finance and shopping strategies for a variety of publications, including ConsumerSearch.com, ShopSmart.com, and the Dollar Stretcher newsletter. She also maintains a personal blog, Ecofrugal Living, on ways to save money and live green at the same time.

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