Used Car Buyers Guide: Dealer Warranty Means Just That

We have written extensively about the revised FTC Used Car Rule. The revised rule went into effect January 27, 2017. It prescribes use of a revised buyers guide, although dealers can exhaust their existing supply of used car buyers guides if they make the appropriate disclosure changes required by the rule through January 27, 2018.

The major change in the new used car buyers guide form comes on disclosure of non-dealer warranties. Under the former buyers guide, a dealer disclosed a warranty in the warranty box whether it was backed by the dealer, by the manufacturer, or by a third party warrantor.

The revised rule changes that. If there is a non-dealer warranty offered – the remainder of the OEM’s original warranty, an OEM program vehicle warranty, or a warranty backed by a third party supplier – the dealer may not disclose that in the warranty box. That is because that box has been relabeled “DEALER WARRANTY” instead of “WARRANTY”. The box on the revised form is to be checked only if a warranty backed by the dealer is issued, and then the dealer must describe the systems covered and the duration of the coverage. If an OEM original warranty, an OEM program vehicle warranty, or a supplier-backed warranty is the only warranty covering the vehicle, that information may be disclosed by checking the box under “NONDEALER WARRANTIES FOR THIS VEHICLE”. The dealer must then check the box for “AS IS – NO DEALER WARRANTY”.

OEMs and suppliers of non-dealer backed warranty coverage do not like this new provision. They do not like to have the dealer prominently disclose that vehicles are sold as is when there is a strong OEM or supplier-backed warranty provided. Some OEMs and suppliers have decided to resolve the issue by telling dealers they can (and even supplying forms that do) mark the dealer warranty box and then in the systems covered block note language such as: “[Manufacturer] stands behind the warranty applicable to the systems of this vehicle.”

There are two problems with this approach. First, the FTC has never provided any indication in any of the materials it has produced on the revised rule that this is permitted. The block for disclosure of a dealer warranty is just that. If the warranty offered with the vehicle is not dealer-backed, then the statement that a dealer warranty is being issued with a description that it is being backed by the manufacturer likely violates the FTC rule requirements.

Second, the FTC rule does allow an additional sticker to explain warranty information if necessary. However, the FTC has stated it will not permit stickers that are confusing. The stickers that have been prepared for dealers by these OEMs and suppliers look like the FTC buyers guide. A dealer that chooses to post that along with the appropriately corrected buyers guide runs the risk of having the FTC charge them with causing confusion under the rule.

Many suppliers are in the business of providing completed buyers guides. Do not assume they know the law. It is you who will be subjected to crippling FTC civil penalties, not the supplier, for improperly completed buyers guides.

When you are faced with a situation in which your supplier provides you form stickers indicating that there is a dealer warranty backed by the manufacturer, we suggest that you ask that supplier to provide a legal opinion on which you may rely that the buyers guide seemingly filled out contrary to FTC guidance is permitted under the revised used car rule with full indemnification for losses if you are fined by the FTC. Without that, we suggest that these forms of buyers guide do not provide you protection under the FTC Used Car Rule that your dealership deserves.