California Lemon Law Blog

On July 1, 2009, a federal program signed into law by President Obama provides a rebate for people who trade in older gas-guzzlers for new, more fuel-efficient automobiles. The Car Allowance Rebate System (CARS) program is applicable to car purchases that occurred on or after July 1, 2009. People with vehicles that qualify for the program may be able to receive rebates between $3,500 and $4,500 on the purchase of a new qualifying vehicle. To qualify for the program, the following conditions must apply:

• The vehicle traded in must be less than 25 years old by the trade-in date and in drivable condition.


• The rebate applies only to the purchase or lease of new vehicles with a manufacturer’s suggested retail price of $45,000 or less. The new vehicle can be from a foreign or domestic car manufacturer. Pre-owned vehicles are not eligible for the program.


• Generally, the vehicle being traded in must get mileage of 18 miles per gallon or less (different requirements apply to some cargo vans and very large pick-up trucks).


• Trade-in vehicles must be registered and insured continuously for the full year preceding the date of the trade-in.


• Participating auto dealers will apply the rebate at the time of purchase so no vouchers are required.


• The CARS program runs through Nov 1, 2009 or when the program funds are exhausted, whichever comes first.


• Vehicles traded in must be destroyed. Therefore, the value you negotiate with the dealer for your trade-in is not likely to exceed its scrap value. The new law requires the dealer to disclose an estimate of the scrap value of your trade-in vehicle.

The CARS program is implemented and overseen by the National Highway Traffic Safety Administration (NHTSA), which must publish the program’s rules and regulations by July 24, 2009. The new law requires auto dealers to register to participate in the program, and the agency will update the list of participating dealers on the website. Anyone wishing to take advantage of the program is encouraged to contact dealers in their area to see which have registered. States will license the respective dealers to sell new automobiles.

Continue reading " New Federal Car Rebate Program Information " »

A body shop owner and the shop’s manager have been arrested for their role in a series of alleged car repair frauds in California. This article said that according to California insurance commissioner Steve Poizner, the two men arrested on July 1, 2009, were charged with multiple counts of auto insurance fraud. Both the 52-year-old owner and the 32-year-old manager were held on a $50,000 bail.

"Insurance fraud costs everyone money when it's passed on to consumers in the form of higher rates," says Poizner. "If you defraud an insurance company, the Department of Insurance will find you and help prosecute you."

The men were charged as a result of a California Department of Insurance Urban Auto Fraud Task Force investigation in conjunction with Farmers Insurance. The insurance company conducted inspections of repair work performed by two Choice Auto Body repair shops in Newark and Santa Clara. The 52-year-old defendant was the owner of both shops and the 32-year-old was the manager of the Santa Clara shop. After conducting 28 inspections of repairs the shops performed, the insurance company found that the shops had overbilled the company for repairs on 20 of the vehicles.

The two men allegedly repaired old parts but billed the insurance company for new parts or used parts of inferior quality in the repairs. The insurance company estimates that the alleged fraud cost them thousands of dollars. The car repair fraud case is currently being prosecuted by the Santa Clara District Attorney’s Office.

Although Farmers Insurance was the victim of the car repair fraud in this case, thousands of Californians are the victims of car repair fraud every year. Most victims of car repair fraud are unaware they have been victimized as this type of fraud can be easily hidden.

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A recent story contains welcoming news for car owners who are waiting for lemon law refunds from auto manufacturer Chrysler. A new agreement has been reached between Chrysler’s new Italian owners—Fiat—and a coalition of states. The agreement is part of a bankruptcy court order which upholds the company’s obligation to pay off lemon law claims arising before the company’s bankruptcy.

The article states that as of June 1, 2009, the new agreement will allow consumers who have Chrysler vehicles made within the last five years before the company underwent bankruptcy proceedings, to collect lemon law claims if necessary.

The news comes as a welcome relief to residents of California and the seven other states that participated in the talks with Chrysler and new owner Fiat. Until the agreement was reached, the status of California lemon law claims hung in a legal limbo due to the unique standards of bankruptcy proceedings.

Under bankruptcy rules, outstanding claims for payment may not be processed without approval from the judge overseeing the proceedings. Although sources quoted in the article state that Chrysler acted promptly to request approval to begin making lemon law refunds, consumers in California and other states saw their lemon law refund checks declined by their banks due to insufficient funds.

Hopefully, the new agreement will spare future claimants the shock of having their lemon law buyback checks bounce. The new agreement will also do much to bolster consumer confidence, and may help reduce the blow being dealt to California’s Chrysler dealers. A U.S News and World report news item states that over 800 Chrysler and related dealers across the nation must cease selling Chrysler vehicles as of June 9, 2009. The beleaguered dealers have slashed prices in order to attract buyers, but until now the combination of economic uncertainty and concerns over Chrysler’s ability to honor its lemon law commitments has dampened consumer willingness to purchase a new car.

Continue reading " Lemon Law Obligations Upheld " »

On June 1, 2009, GM joined automaker Chrysler in announcing plans to enter bankruptcy. Although the Obama administration and some GM officials are hopeful that this action will bring about long-term financial health for the company, expect short-term woes to continue. A report from USA Today illustrates the effects of this decision as it propagates across the automotive industry.

Although it is not expected that GM will be sold, thus alleviating some concerns over lemon law obligations, the effects of its bankruptcy can have a far-reaching impact on auto buyers. For example, auto parts manufacturers usually make parts for several brands and models of cars. As GM slows or ceases production of cars and trucks, these parts manufacturers idle production lines. Idled production lines in turn affect the production of parts for other brands of cars.

For consumers saddled with defective vehicles, this may translate into longer, more frustrating experiences when attempting to get their cars repaired. As dealerships and repair centers close down, consumers may find that returning a vehicle is a more time consuming and costly process than it has been in the past. Erratic parts production may create long delays for owners of all car brands. Specific re-tooling for a defective part will cause considerable production delays.

While auto owners across the country could face these effects, California car owners may be hit harder by the bankruptcy of industry giants like GM. California has one of the largest markets for car sales in the United States. As the company rushes to shut down operations, the local economy suffers. Smaller parts shops and auto service stations may have to close down in the face of falling demand, thus heightening the difficulty in getting service and parts to the car buyers stuck with defective vehicles.

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A recent story in The Wall Street Journal’s Marketwatch highlights the growing problem of car dealerships that fail to forward consumer payments. During the economic downturn, more dealerships are failing to pass on consumer payments for taxes, title fees and other costs. In some cases, dealers are refusing to fulfill their obligations to pay off the remaining balance on trade-in cars, making consumers responsible for thousands of dollars in hidden costs.

Although car dealer fraud is not a new phenomenon, the economic situation has contributed to these activities. According to figures cited by the news story, the California Department of Motor Vehicles has seen the number of open cases against dealers for failing to transfer customer payments double since the beginning of 2007.

Why do car dealerships fail to pass on consumer payments? While a small percentage of dealerships may actively withhold customer payments out of a desire to commit fraud, in times of economic difficulty, plummeting cash flow may contribute to a number of these cases. If a dealership finds its flow of ready cash dwindling, anxious creditors may freeze the dealership’s funds.

Given this problem, a strange Catch-22 arises for California car buyers. Although many troubled dealerships are offering incredible discounts for new and used vehicles, these very same dealerships are the ones most likely to be unable to forward your taxes, title fees and other costs. Thus, a great sticker price could deliver a nasty surprise after the sale is complete.

For struggling dealerships, this situation can lead to a downward spiral as concerned consumers stay away from deals offered by troubled car sellers, which chokes off their cash flow and leads to the dealers being unable to pass on consumer payments.

Continue reading " Dealers Not Passing the Buck in Hard Times " »