What The Massachusetts Used Car Warranty Law Means For Dealers

by | Jul 26, 2020

If you are a car dealer in Massachusetts and you plan on selling vehicles for more than $700 dollars with less than 125,000 miles you are required under the law to repair any defects or malfunctions that impair a vehicle’s use or safety. If a car has a defect that cannot be repaired by the dealer within 3 attempts or keeps it out of service for more than 10 business days the dealer is required to buy back the vehicle.

This warranty is required to be presented to the customer in written form.

To be considered a dealer, you need to have sold 3 or more vehicles in the last 12 months.

And yes, if you’ve been flipping a few cars on the side, you are considered a dealer!

The aim of this law is to provide certain rights to any of your customers who purchase any of the following types of vehicles that we’ll talk about in just a second.

The Vehicles Covered By The Massachusetts Dealer Warranty Law

  • Any used car, van, or truck that is sold by a Massachusetts new or used car dealer that is sold for more than $700 dollars and has less than 125,000 miles.
  • Demonstrator/fleet/executive vehicles are also covered, but any consumer who qualifies for this relief must seek it from the manufacturer first before seeking it from you.
  • Salvage and antique cars are covered by this law as long as they are sold for $700 dollars with less than 125,000 miles.

The Vehicles That Aren’t Covered By The Massachusetts Dealer Warranty Law

  • Motorcycles, mopeds, dirtbikes
  • Any vehicles sold for less than $700
  • Any vehicles sold with more than 125,000 miles
  • Leased vehicles
  • Previously leased vehicles that are sold are exempt if they are sold to the lessee, a family member of the lessee, or an employee of the lessee.
  • Any vehicle registered to a business or purchased for business purposes.
  • Motor homes and offroad vehicles (ATVs, Dune Buggies)

The Warranty Makes You Responsible For All Defects Or Malfunctions That Affect Use or Safety

Before you sell any car to the consumer, first make sure that the car has been repaired so that it’s completely free from defects or malfunctions that will impair safety or usability.

Under this law, you are allowed to charge the customer up to $100 bucks to repair all the safety defects, but only if you tell them this upfront on the copy of the written warranty you are supposed to give them.

If you don’t state what you’ll charge, you can’t charge them anything. So make sure you put that $100 in there.

You’re not able to dodge your obligations under this law just because you tell consumers about known defects. If you know about the defect, it has to be fixed.

You also cannot ask any customers to give up their rights under this law. You are still responsible for upholding it even if the consumer gives you a written statement saying that they are giving up their rights.

In other words, this law sticks like glue. You can’t get away from it, even if you want to.

Sounds kinda like death and taxes to me.

You Don’t Need To Do The Repairs Yourself, But…

Under the warranty, you may peform the repair directly.

You may also arrange and pay for a quick repair from another shop or dealership.

During this period, you as the dealer are responsible for paying the costs of towing the vehicle up to 30 miles in order for the consumer to obtain repairs or return the car to you.

How Long Is This Warranty?

The length of the warranty depends on the mileage when you sell the car.

If for some reason, the vehicle’s true mileage isn’t known, then it’s based on age, which we’ll talk about in just a minute.

Mileage At PurchaseWarranty Period (Whichever Comes First)
Less than 40,00090 days or 3,750 miles
Between 40,000-79.99960 days or 2,500 miles
Between 80,000-124,99930 days or 1,250 miles
Over 125,000 Implied Warranty Only

If the odometer has been altered or is otherwise damaged, the length of the warranty will depend on the model year of the vehicle.

To determine the vehicle’s age, take the model year minus the year when you sell the vehicle.

For example, if I sold you a 2011 car in 2020, that car would be considered 9 years old.

And before you knock me for suggesting you might not be able to do basic subtraction, trust me, I have seen some shit.

Better to be safe than sorry.

Age Of VehicleWarranty Period (Whichever Comes First)
3 years old or less90 days or 3,750 miles
More than 3, but less than 6 years60 days or 2,500 miles
6 years old or more30 days or 1,250 miles

This warranty period begins the day the consumer takes possession of the vehicle.

What Is The Implied Warranty?

Massachusetts consumer laws protect all purchases from businesses under an Implied Warranty of Merchantability.

For you as a dealer, what this means is the car needs to work for a certain period of time, free from reasonable defects.

According to Section 2-314:

2) Goods to be merchantable must at least be such as

(a) pass without objection in the trade under the contract description; and

(b) in the case of fungible goods, are of fair average quality within the description; and

(c) are fit for the ordinary purposes for which such goods are used; and

(d) run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; and

(e) are adequately contained, packaged, and labeled as the agreement may require; and

(f) conform to the promises or affirmations of fact made on the container or label if any.

(3) Unless excluded or modified by section 2-316, other implied warranties may arise from course of dealing or usage of trade.

What Isn’t Covered Under The Warranty

Under the Used Car Warranty law, there are a number of things you are not responsible for.

As a reminder, the warranty requires you to repair any defects or malfunctions, or combination of defects or malfunctions, which impair a vehicle’s use or safety.

In deciding whether a defect or malfunction impairs safety, determine whether the defect or malfunction creates or has the potential to create danger to the consumer, the passengers, to others, or to property.

With that being said, here’s what you aren’t responsible for covevring:

  • Defects that only affect appearance. These are things like paint, and defects in the interior.
  • Defects that do not impair use or safety.
  • Any defects that are covered by the manufacturer’s warranty if it was transferred to the consumer. You need to be sure of this beforehand.
  • Damage caused by negligence or abuse. For example – if a car is crushed by a tree branch during a storm.
  • Damage caused by accidents unrelated to any defects. This includes vandalism, or repair by anyone other than you, someone you authorize, or the manufacturer.
  • Any damage caused by substantial changes that the consumer made to the vehicle. For example, lift kits, sunroofs, non-OEM carburetors or exhausts.

You should be ready to prove that the cause of the damage was not related to a defect or malfunction that you were supposed to replace. You won’t be able to simply state that the above is the case. It will be thrown out in court.

What we reccomend new dealers do is the following:

  1. Keep a record of the condition you bought the car in, including pictures of the car in working condition.
  2. A record of any new parts or other repairs that were done. Include invoices or statements of work whenever possible.
  3. Have another mechanic inspect the car before putting it up for sale, and have them sign a certified statement if you’re really concerned.

Your Options For Buying Back The Vehicle

The Used Car Warranty laws allows dealers to buy back any vehicles covered under this law instead of making repairs, if you so choose.

You’re allowed to buy back the vehicle for the full purchase minus a charge of 15 cents a mile for each mile the vehicle has been driven between the original sale and the time of repurchase.

The consumer is responsible for proving their reimbursement costs to you, and should provide supporting recipts and documentation.

If you’re planning on buying back a car from one of your customers, you should plan on doing it sooner rather than later because the customer can keep driving the car until you make the full refund, less the mileage put on it.

The Buyback Offer Must Be Written

In order to make a buyback offer, while you may initially make such an offer in person or on the phone, you must follow up with an offer in writing.

It’s smart to send the written offer by certified mail, return receipt requested, or by registered mail, and save a copy of the letter and return receipts and other tracking information for your records.

This will ensure that if it ever comes up in court, you have a record that you followed the proper procedure.

You must allow your customer at least five (5) business days to respond to your offer. If your customer does not respond to your offer in that time, you should write again to the customer to confirm that you made an offer and that you have not received the customer’s response.

The Steps For Calculating The Buyback Refund

Whether or not you buy back the vehicle on your own, or an arbitrator orders you to buy the vehicle back, here is how you arrive at the final refund value according to the Used Vehicle Warranty Law.

First, you need to get to get your rough refund price by adding the following factors together.

Add:

  1. Start with the purchase price, including the amount for any trade-in. If you gave an over allowance with the trade-in that was specifically disclosed from the actual cash value of the trade-in on the final bill of sale, or another document you can subtract that.
  2. Finance charges
  3. Registration fees
  4. Any pro-rated portion of damage, collision, or comprehensive insurance paid prior to the buyback
  5. The non-refundable portion of payments made for credit life, credit accident, and health insurance on any vehicle loans
  6. The non-refundable portion of any extended warranties or vehicle service contracts
  7. Unreimbursed towing costs for a distance of up to 30 miles
  8. Up to $15 dollars a day for any additional transport the customer needed while the car was out of service, starting from when the vehicle is out of service, and/or starting on the 3rd day of a repair attempt
  9. Payments made toward the $100 repair deductible that you have an option to charge.
  10. Other costs to the customer for the defect.

Once you’ve added up all these costs, you then need to subtract a few more factors to reach your final buyback price.

Subtract:

  1. The amount of overallowance for your buyers trade in that we talked about before.
  2. You can also subtract 15 cents per mile driven from the time of delivery until when the refund is given. This doesn’t include mileage you put on the car driving it around during your repair attempts.

There are some additional costs that you do not have to reimburse, such as any fees for lawyers, lost wages, excise or sales tax, or any other cost not directly related to the defect.

You are also required to return any trade-in, assuming that you still have it, and it’s still in the same condition. This will remove the value of the trade-in from the refund price.

Otherwise, you’ll just include the value as part of the reimbursement.

If The Vehicle Is Damaged By The Customer Before You Rebuy It

Shit happens to cars all the time, and luckily under this law you also have a reasonable amount of protection if the customer messes something up.

If the car has damage that isn’t reasonable wear and tear. and is through no fault of yours or the manufacturer, and that the damage is not caused by the defect, you’re good.

Big breath. Whew. That was a mouthful.

In this case, you are allowed to have the customer pay for the repair of the damage, or pay you a reasonable cost of repair, or must allow you to deduct the reasonable cost of repair from the purchase price.

If The Customer Refuses The Buyback, They Have Less Rights

If the customer refuses your offer to buy back the vehicle, they are only covered by the implied warranty of merchantabily I described above.

In other words, the vehicle needs to work. For specific differences between the Implied Warranty and the Used Vehicle Warranty Law, please get specific council.

Recap

All in all, the Used Car Warranty law is really simple. Make sure any cars you sell are in good working condition before you sell them.

Have them inspected ahead of time. It helps, trust me.

I know it’s really tempting to want to squeeze out an extra $900. Don’t do it. The extra you’re going to spend with back and forth headaches, not to mention the cost of your own time make it worth it to get it running, and to get it running right.

Just because it’s “as is” doesn’t mean you should do the bare minimum.

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