What If Your Recently-Bought Used Car Explodes?

You just bought a used car and the engine blew up on the drive home from the dealership. What can you do? The answer depends primarily on one question: Did you buy it "as-is"? Judging by the phone calls I get at my office where I deal with automobile warranty law ("Lemon Law") the answer is usually, "Yes." Followed by, "What does 'as-is' mean?" If you're asking the question now – while the car with the blown engine drips its last ounce of oil in your driveway – it is too late. So, follow along as I explain what all of this means so you can protect yourself in the future.

The notion of what a "warranty" is, in general, would take far too much space to explain here so we'll jump ahead to the one which is important in this context: the Implied Warranty of Merchantability. Most states have adopted the Uniform Commercial Code where all of this is laid out. It says that if you buy goods from a merchant who deals with goods of that kind, you can expect that they will perform as one might expect without the merchant having to actually say it for it to be enforceable. (It says the goods will be "fit for the ordinary purposes for which such goods are used.") A refrigerator you buy from an appliance store will keep your food cold. A lawn mower from the Toro dealer will cut your grass. The car battery from the auto parts store will provide and store electricity for your car. You can expect these things to happen even if the salesperson was silent on what the products will do. It is implied by operation of law.

So, we start from the point that an automobile will provide safe and reliable transportation if you are buying it from a merchant who sells goods of the kind (a car dealer).

Note that this does not apply to a private sale. A private seller is not a merchant so the implied warranty never comes into existence. This protects you if you are a private seller but it means you must be more careful when buying from a private seller.

But, there is a loophole that swallows the rule: Most states allow sellers to disclaim the implied warranty of merchantability entirely, so long as they do it conspicuously. Once they do that, it is no longer implied and does not exist. And, in the states where it is allowed, most used car dealers disclaim the Implied Warranty of Merchantability. A while back, there was so much confusion in this area, the Federal Trade Commission came up with the Buyer's Guide. It is a single sheet of paper which specifies "WARRANTIES FOR THIS VEHICLE." It give two options: AS-IS NO WARRANTY and WARRANTY. There are boxes in front of those two choices and the dealer is told to check one. Federal law requires the sticker to be visible to a car shopper who is looking at the vehicle. Hence, it is often in one of the windows.

What If Your Recently-Bought Used Car Explodes?

A great majority of used cars sold in America are sold with the "As-Is" box checked. (There are several states that do not allow the disclaimer and for them, there is a modified Buyers Guide.)

What If Your Recently-Bought Used Car Explodes?

And "as-is" means with all faults. Repairs are the responsibility of the buyer. There are no guarantees. That car is yours. It could explode as you drive it off the lot. The smoldering remains are still yours. It even says so: "YOU WILL PAY ALL COSTS FOR ANY REPAIRS. I do wish the Feds would cool it with that cap-lock though.

As I noted above, some states do not allow the implied warranty of merchantability to be disclaimed. I have seen conflicting lists of which states those are but here is the easy way to figure this out. Those states use Buyers Guides that look like this:

What If Your Recently-Bought Used Car Explodes?

If you bought your car in a state with the "Implied Warranties Only" box and it was checked, consult with a local attorney.

For everyone else, we will assume the "As Is - No Warranty" box is checked. And, as an attorney, I must point out that there are some possible lifelines here. For example, the "as-is" disclaimer does not disclaim everything – it just disclaims the implied warranty of merchantability. So, when a consumer contacts me and says they bought an as-is car with a rolled back odometer, guess what? An odometer rollback is a separate problem. Besides being a felony for the person who rolled the clock back, it creates a separate cause of action which cannot be disclaimed. And don't get me wrong; I have opposed attorneys who came into court and tried to tell judges that their clients "disclaimed" that too. One attorney yelled, "We disclaimed everything!" His argument didn't fly.

As a car shopper, here is what you need to do. When looking at a car being sold 'as-is," you have to do one of two things. Have it inspected by someone who knows cars. If you are a mechanic, you can inspect it yourself. If you are not a mechanic, pay one to check the car out for you. It won't cost much but the peace of mind will be worth it. If you cannot afford a mechanic or do not feel the cost is justified (even though it is), then price the car as if you expect a catastrophic breakdown immediately. That way, when the transmission scatters on the drive home you will already have budgeted for it. If the car stays intact and gives you years of trouble-free service then you will have gotten a good deal.

And of course, if your recently-purchased car came with a warranty (the other box was checked) take it back to the selling dealer and seek repairs under warranty if appropriate.

To sum up: If you buy a used car from a dealer "as-is," you bear the risk that the car could go kablooey the second you take delivery of it and there most likely will be nothing you can do about it. If you are car shopping, be aware of this and have the car inspected before you buy. If not inspected, then negotiate a price appropriate for a car which might not outlive the drive home. (And no, there is no "law" that says you have to get it "off the lot" before it "becomes" yours. We've already talked about that . . .)

Steve Lehto has been practicing consumer protection and lemon law for 23 years in Michigan. He taught Consumer Protection at the University of Detroit Mercy School of Law for ten years and wrote The Lemon Law Bible. He also wrote Chrysler's Turbine Car: The Rise and Fall of Detroit's Coolest Creation and The Great American Jet Pack: The Quest for the Ultimate Individual Lift Device both published by Chicago Review Press. Follow him on Twitter: @stevelehto