New lemon law protects buyers

By Jack King

Clovis used-car dealer Benny Pacheco said there used to be a saying among some used-car dealers: “If a customer buys a car and it breaks in half, the customer owns both halves.”
A lemon law, passed by the New Mexico Legislature in 2003 nullifies that piece of grim humor, eliminating the possibility of “as is” used car sales in New Mexico. But used-car dealers statewide are still assessing the effect of the law on their businesses, said Pacheco, who owns Grand Traders in Clovis.
Sponsored by State Rep. Al Park, D-Bernalillo, House Bill 225 went into effect Jan. 1. It establishes an “implied warranty of merchantability,” for used vehicles that will last for 15 days or 500 miles, whichever comes first, after the vehicle is sold.
According to the bill, the vehicle must be “substantially free” of any defect that significantly limits its use for ordinary purposes of transportation on any public highway.
“It doesn’t have to be perfect, but it has to be in a reasonable, safe condition for the purpose intended,” said Assistant Attorney General Joel Cruz, head of the state attorney general’s consumer protection division.
Under the law, the warranty may be waived for “particular” defects on the car, if the dealer discloses the defects to the purchaser and the purchaser signs a statement saying he understands the defect. However, the waiver would only apply to the specific defect disclosed, Cruz said.
Under the law, during the 15 day/500 mile warranty period, a customer can bring the car back to the dealer for defects that harm its reasonable use. The dealer has two chances to repair the car, bringing it up to the conditions of the implied warranty. The customer must pay half the repair bill, up to $25, and the dealer’s liability is limited to the price the car sold for, Cruz said.
If the car cannot be made to fit the conditions of the warranty, the dealer is required buy it back for the original purchase price, said Guy Appelman, executive director of the New Mexico Independent Automobile Dealers Association.
The law also requires that if the manufacturer, its agent or its authorized dealer has been required to replace or repurchase a vehicle, the dealer must attach to it a written notification that it has been replaced or repurchased.
Cruz said the new law is a legitimate piece of consumer protection.
“Before we had this law, New Mexico was one of only a minimum of states where the dealers could sell ‘as is.’ It has a minimum warranty; other states have much more extensive warranties,” he said.
Appelman said most dealers who have read and understand the law do not object to it and are happy to provide the services it requires — many provide them already, he said.
But, he added, it does raise some questions for dealers. As a new law, it has not yet been tested in court and many of its provisions are still subject to interpretation. He has asked for, but has not yet received, a letter from the AG’s office setting out interpretations he can supply to the members of his association. Also, the new law sets a 15-day limit to the implied warranty, but gives purchasers 30 days to report a problem. This could lead to abuse of the warranty, he said.
Cruz said he sent a draft letter in late December to both Appelman and Charles Henson, president of New Mexico Automotive Dealers Association, in preparation for sending a letter explaining the law to dealers across the state. He has not yet received draft changes back from either organization, he said.
He added that when the purchaser takes too long to report a vehicle flaw it creates problems for all concerned, but the bill’s author wanted to give purchasers plenty of reporting time.
“It’s for cases where a person is unable to report the problem. In practice, the consumer will report a problem as soon as it occurs,” he said.