New Information from the FTC on the Used Car Rule

In September, the FTC issued a set of questions and answers about the revised Used Car Rule. The Q&A highlights some issues that dealers should understand.

OEM Warranty Disclosure

Is your franchisor insisting that you disclose the terms of the OEM warranty on the buyers guide as if it is yours?  The FTC now states it will be flexible in allowing disclosure of the provisions of an OEM warranty in the “SYSTEMS COVERED/DURATION” section of the buyers guide. The Q&A clarifies that if you wish to do so, you may include in that section details about OEM warranty coverage “as long as you clearly disclose that the warranty coverage is from the manufacturer, and not from you, the dealer.”  If that is the only warranty issued, the dealer still must disclose that the vehicle is being sold as is or with implied warranties only. If you also issue your own warranty, you must disclose the warranty terms in the SYSTEMS COVERED/DURATION, section, and you may disclose the OEM warranty terms there. That will take a good bit of space to clearly differentiate the obligor of each warranty’s terms, and the FTC addressed that.

Changing the Form

The FTC clarifies that a dealer cannot change the buyers guide form. However, the Q&A specifically provides “you may expand the SYSTEMS COVERED/DURATION to include necessary information by, for example, printing the Buyers Guide on larger paper.”

Third Party Dealer Warranties

The FTC clarifies that if a dealer sells a vehicle with a third party warranty, even if the dealer claims the used vehicle is “certified” and does not charge the customer, that is not a dealer warranty. So a dealer must mark the box either as is or implied warranties to show no dealer warranty, and then disclose that a third party warranty is being provided in the “OTHER USED VEHICLE WARRANTY APPLIES” section.

Name of the Person to Contact

The FTC’s position in the Q&A is the Rule requires the name and telephone number of a person to contact for complaints. A dealer may also include a job title in the event that named individual leaves the dealership, but it is the FTC’s position that a person’s name should be used.

Separate Warranty Document

As we have advised dealers for some time, the description of an applicable dealer warranty cannot meet the FTC’s Warranty Disclosure Rule. As the FTC clarifies in its Q and A, a dealer that offers a written warranty cannot rely on just the buyers guide:  “The warranty and related disclosures must be a separate document from the Buyers Guide.”

For more information, see the FTC Q A here: