What do you do when your new car turns out to be a lemon?
A friend of mine recently purchased a new vehicle. She had to return her new car a number of times as the starter and battery kept failing (I believe the dealer replaced the battery twice and the starter three times). She started to worry that she had purchased a lemon. Frustrated, she called me to find out about the dealer’s legal obligations. Because, in our day to day practice, we don’t deal with these type of files very often, I wasn’t able to answer her right away.
Legal costs conundrum
Like most professions, we deal with a defined number of issues on a regular basis. However, every now and then, something new arises. When this happens, we have a choice. We can refer the matter to someone who deals specifically with the new issue, or we can spend the time to familiarize ourselves with the problem.
If we spend time to familiarize ourselves with a new problem, we normally charge our clients for the research. This doesn’t occur very often as our clients are better served dealing with a lawyer who is familiar with the issue. But some legal issues, like this car problem, are not “big” enough issues for most lawyers. Meaning that legal costs to research outweigh the potential benefit. Few clients happily pay $2,000 in legal fees for a $5,000 repair job.
In this case, because my “client” is a friend and, as luck would have it, I recently read an article about the issue, I decided to look into it. Based on my research, I was able to offer her advice and write this article about consumer options when buying a problem vehicle, otherwise known as a “lemon”.
Lemon Laws in the U.S.
Every state in the U.S. enacted a “lemon law”. While various state laws are somewhat different, in most cases, a manufacturer who sells a lemon must make repairs, replace, or refund a vehicle after a “reasonable” number of repair attempts. Courts can also order manufacturers to pay the legal costs consumers bear when suing under these laws.
In Canada, this type of issue falls within provincial jurisdiction, so each province must enact legislation on the issue. Ontario, B.C., Alberta, Nova Scotia, Quebec and Manitoba enacted legislation on the issue. However, they differ substantially on protections provided to consumers. For example, in Quebec, all vehicles sold are covered under warranty by law. If the vehicle does not measure up to the warranty, the manufacturer must repair at no cost, replace, or refund. The law may also require that the dealer reimburse the consumer if she suffered additional damages as a result of a defective product. Whereas in Nova Scotia and Manitoba, the laws simply compel dealers to disclose the vehicle’s history and whether another jurisdiction branded the vehicle as a lemon.
Dealers in Manitoba
More specifically in Manitoba, as of January 2012, dealers must disclose if the vehicle:
– is new or used
– manufacturer’s warranty has been cancelled
– declared a lemon in another jurisdiction
– has been bought back by the manufacturer through the Canadian Motor Vehicle Arbitration Plan (CAMVAP)
– was damaged by flood or fire
– used as an emergency vehicle (ex: police, fire, ambulance)
– used as a taxi or limo
– rented on a daily or other short-term basis
– written off and branded as salvageable
– has been made to look as if it is a better model than it actually is (or “rebadged”)
– is significantly different from the original or advertised model of the vehicle
– damaged and the cost of repairs from one incident was more than $3,000 (If the actual total cost of repair is known, the dealer must tell you.)
– is new to Manitoba, and if so, where it was previously registered. Licensed dealers must also tell you any other facts about the history or condition that might affect your decision to buy.
Canadian Motor Vehicle Arbitration Plan
Consumers can also choose to participate in the Canadian Motor Vehicle Arbitration Plan (CAMVAP). While this is voluntary, consumers must give up their right to sue in order to participate. Essentially, the consumer and manufacturer plead their respective cases before an impartial arbitrator. The arbitrator can then decide that the manufacturer must…
– buy back the vehicle with a reduction in price based on the vehicle’s use;
– buy back the vehicle at full price;
– reimburse the consumer for repairs;
– make repairs;
– pay out of pocket expenses; or
– the manufacture is not liable for any costs.
According to the CAMVAP annual report, in 2016, in Manitoba, 11 arbitrations were started. In one case, the parties came to an agreement prior to a decision. In a second case, the parties negotiated an agreement that the arbitrator recorded. The other 9 cases resulted in 9 arbitrator decisions as follows:
– One case where the arbitrator ordered the manufacturer to buy back the vehicle with a reduction in price for usage;
– Three cases where the arbitrator ordered the manufacturer to make repairs; and
– Five cases where the arbitrator found the manufacturer not liable.
In 2017, the statistics are as follows:
– 5 arbitrations stared, 2 of which ended in an agreement prior to a decision
– One case where the arbitrator was ordered to make repairs; and
– Two cases where the arbitrator found the manufacturer not liable.
Finally, consumers also have the option to take a manufacturer or dealer to court. While as indicated above, the legal costs of taking someone to court may outweigh the benefits, consumers may be able to save costs by going through small claims court instead. Small claims court awards in Manitoba are capped at $10,000.00. So if a consumer wants a manufacturer to reimburse or replace a vehicle, she should file a claim in Queen’s Bench. However, if the consumer wants the manufacturer to pay for repairs, small claims would provide a cost effective solution.
Philippe Richer is President of TLR Law Group. TLR has been located in the St. Boniface neighbourhood, in Winnipeg, since 1996. The office serves the middle class and small business within the province. With a focus on estates, wills, real estate, and corporate law, he leads his team in providing accessible legal services. Philippe also authored the business law course for the Knowledge Bureau and instructed the français juridique class at the faculty of Law at the University of Manitoba.