How Lemon Laws Work

When Sen. Warren G. Magnuson, D-Wash., and Rep. John E. Moss, D-Calif., got together in 1975 to sponsor the law that eventually became known as the Magnuson-Moss Warranty Act, there was widespread abuse in the U.S. of warranty provisions. Products were sold without warranties, the warranties that they were sold with weren't always clear about what was covered, and getting a warranty enforced was often more difficult than it needed to be. The Magnuson-Moss Warranty Act may not have changed all that, if only because the fine print in most warranties is intimidating to even the most detail-oriented of consumers, but at least Magnuson-Moss required that the fine print be available for the consumer to read before purchasing the product. And it told manufacturers what had to be included in that warranty. OK, so the earth didn't shake when Magnuson-Moss found its way through Congress, but consumers finally had some kind of solid, legal ground to stand on when they bought a product -- especially an expensive product like, say, a car -- that kept breaking down or didn't do the things the manufacturer claimed it would do. Magnuson-Moss may not have been the first lemon law ever passed, but it's the basis for most lemon laws in the U.S. today. It protects everyone, and individual state laws extend that protection.

The Magnuson-Moss Warranty Act is for consumer products only and doesn't apply to products that cost less than $5. It doesn't require that a product come with a warranty -- if it doesn't you're pretty much on your own as far as Magnuson-Moss is concerned. It also doesn't apply to service warranties; however, if a product comes with a warranty, the legislation spells out how that warranty has to be written.

A full warranty guarantees that the consumer can get any parts repaired provided that they don't work as advertised (and aren't the result of damage by the consumer). A limited warranty spells out specific conditions that the warranty covers. The truth is, for full warranty coverage, the consumer is generally better protected by state warranty laws; Magnuson-Moss mostly just defines terms and spells out legal methods for getting a remedy in cases where the warranty isn't honored. So let's look at state lemon laws next.

Every state in the U.S. has some kind of lemon law, but the specific provisions vary from state to state. In fact, your car may be considered a lemon in some states and not in others, so be warned in advance that your local laws may or may not offer you strong protection against all unscrupulous manufacturers and dealers. Let's look at a few examples here:

California lemon law: California has one of the strongest lemon laws in the country, the Song-Beverly Consumer Warranty Act. It requires you to go to the manufacturer's local representative -- this is usually the dealer -- to get the car repaired. If they can't fix the problem that's covered under the written warranty within a reasonable number of tries, they have to replace the vehicle or refund the purchase price minus the cost of any third-party parts you may have added on. However, the manufacturer can deduct from this refund an amount that covers how much use you've gotten out of the car before you first brought it in for repair. This amount is calculated by this formula:

Does it make your head hurt to read that? Maybe an example would make it clearer. For instance, let's suppose that the vehicle has 10,000 miles on it when you bring it in. Divide 10,000 by 120,000 and you get -- excuse me while I get out my calculator -- 0.083333 ... Now suppose the original cost of the vehicle is $40,000. Multiply that by 0.083333 ... and you get $3,333.33. The manufacturer can deduct that amount from your refund. Your refund would then be $36,666.67. That's pretty simple arithmetic, even if it's a bit difficult to do in your head, especially if the amounts aren't neatly rounded numbers like the ones I used.

But the lemon law only kicks in if the manufacturer has had a "reasonable number" of attempts at repairing the problem. What's a reasonable number? Under California law, this isn't a fixed number; it changes depending on a number of factors, including whether the car was purchased during the previous 18 months (making it essentially new) and whether the problem being repaired is life-threatening. (A car still covered by a "new warranty" is also considered new.) The newer the car and the more life-threatening the problem, the fewer repairs should be needed to fix it, perhaps as few as one. If the repairs have taken the car out of service for more than 30 days the repair time is also considered unreasonable.

Other lemon laws: Most states have lemon laws that are similar. Almost all of them give the manufacturer a maximum of four times to repair a problem covered under the car's warranty. If they can't, the car's a lemon. But some state lemon laws are weaker than others. At times manufacturers have been accused of moving cars with known defects to those states for sale. What are your chances of being caught with one? Fortunately, only about one in 300 cars sold in the United States have been determined to be lemons, so the odds that you'll need lemon law protection beyond that covered by federal warranty law are pretty slim.