March 18, 2025
By Barrie Charapp Beaty
Charapp & Weiss, LLP
bbeaty@cwattorneys.com
In July 2024, Vroom entered into a settlement with the Federal Trade Commission in the amount of $1 million, with the FTC issuing refunds to consumers from the settlement monies at the beginning of March 2025. The FTC’s allegations against Vroom were that it participated in deceptive and unfair acts or practices regarding inspections and shipping of vehicles, failure to conspicuously display the Used Byers Guide, and failure to provide written warranties prior to sale to consumers.
In the FTC’s statement and the complaint against Vroom, the FTC claims that:
- Vroom advertised that its cars underwent “multiple inspections”, including listing 184 points of inspection that were checked by Vroom for every car sold but consumers’ had various complaints about the vehicles that told a different story of the condition of the vehicles;
- The required Buyers Guide, which lists a dealer’s basic warranty terms and conditions, including the duration of coverage, the percentage of total repair costs to be paid by the dealer, and the exact systems covered by the warranty was not provided until late in the purchase process, and often were missing required information; and
- Vroom also failed to provide the terms of its warranty on its website in close proximity to the warranted used vehicle and it didn’t inform consumers how they could obtain the warranty’s terms prior to the receipt of the sale documents.
Often claims of fraud against dealerships result from sale of used vehicles rather than new vehicles, and the Vroom settlement is a lesson for all dealers when it comes to how used vehicles are advertised, if they are advertised as “certified” and thoroughness of warranty disclosures So about those used vehicles….
Inspect All Used Vehicles
Too often, used vehicles managers cannot wait to get used cars onto the front line, and that means dealership employees are not taking the time to thoroughly inspect them beforehand. If that’s happening in your dealership, it’s a problem.
Most used vehicle managers will argue that they review the vehicle history report or maybe even the title history for the vehicle. Since those show no problems, they see no reason to inspect a vehicle they wish to retail. However, there are lots of reasons why a problem with a vehicle doesn’t show up on a vehicle history report. Perhaps the issue with the vehicle – damage or flooding for example – was not reported to an insurance company and was repaired by the owner out of pocket. Or perhaps the vehicle history report company is delayed in updating recent damage or flooding to the report prior to the dealership’s sale of the vehicle. For many reasons, a clean vehicle history report does not mean that a vehicle has not had problems. CARFAX reports specifically state that “This CARFAX Vehicle History Report is based only on information supplied to CARFAX and available as of [Date] at [Time]. Other information about this vehicle, including problems, may not have been reported to CARFAX. Use this report as one important tool, along with a vehicle inspection and test drive, to make a better decision about your next used car.” More importantly, a clean vehicle history report does not absolve a dealership from failing to follow its obligations under the law, a reminder underscored by the recent Vroom settlement.
Title histories may also be misleading. The fact that a vehicle has never been titled in the name of an insurance company doesn’t mean that the car was never declared a total loss. Insurance companies have been known to simply “skip title” by arranging a purchase from the owner of a seriously damaged vehicle directly to a subsequent owner (it if has been fixed) or to someone who will fix it for resale (if it has not been repaired). An insurance company’s name sometimes never shows up on the title history of a totaled vehicle.
There are a number of reasons you must carefully inspect the used cars you sell at retail.
- Floods. Take 2024 for example, with storms and flooding in various parts of the United States, (i.e., Florida and North Carolina), there are many cars that have suffered flood damage. Its important for dealers to remember that vehicles may become “flooded” even if they were not partially submerged in standing water. Many vehicles suffer flood damage from hard rains that damage interiors through open windows or through windows and sun/moon roofs with poor or damaged seals that allow rain water to leak in causing extensive damage. The fact that its flooding hasn’t yet appeared on a vehicle history report doesn’t mean the car dealers are buying isn’t a flood car. However, you won’t see those if you don’t carefully inspect the vehicle. Its important for dealers to remember
- Serious damage. Plaintiffs’ lawyers love to sue dealers over used vehicles that have suffered previous damage without disclosure of that to the buyer. Once again, you cannot depend on the vehicle history report or the title history. You can best protect yourself from a claim that a used vehicle suffered severe damage by inspecting it carefully, including putting it up on a lift to look at the undercarriage. While the outside exterior body of the vehicle does not show accident damage, the undercarriage may tell a different story and the next time the customer takes the vehicle for any service work at a different dealership, you can bet they will disclose that to the customer as an opportunity to sell them a replacement vehicle.
In short, there are many reasons why you must inspect used vehicles before you put them on the lot at retail. Of course, it is important to know what is in the vehicle report and the title history so you should review each for every car that you retail. But it is just as important to inspect the car to make sure that there is no condition that should put you on notice of a serious problem.
Certified Used Vehicles
For dealer’s that have their own CPO program, it must be clear what the term “certified” means. If it's under their own program, Dealers cannot just advertise “Certified Pre-Owned” without providing who has certified the vehicle and under what program. Consumers automatically think a “Certified” vehicle means it is meeting a manufacturer certified program rather than a dealer’s own certified program. What are the dealer’s developed standards that make this vehicle certified? Do those standards provide significant benefits to the customer by ensuring that the vehicle is in good mechanical condition, is free from serious body damage or flood damage, and meets some objective standards of quality?
For dealer’s that are certifying the vehicle under a manufacturer program, you must ensure that the manufacturer’s CPO requirements are met prior to selling the vehicle to the consumer. Dealers should be following the rules set forth in the manufacturer’s Program Manual and should adhere to all program requirements. For example, for some manufacturer CPO vehicles, the vehicle must be submitted to the manufacturer and it be approved for sale by the manufacturer as a CPO vehicle prior to selling it to customers. Additionally, some manufacturers require a service history report of all previous warranty repairs be provided to the customer prior to purchase. Make sure sales personnel know the manufacturer’s rules concerning CPO vehicles so that it’s a clean sale.
When advertising a vehicle as CPO, the disclosure of who is actually certifying these vehicles is mandatory. Consumers automatically think “certified” means that it falls under a manufacturer certified program. The advertisement should provide what certified means and by who. There should be disclosure that it’s your program versus a manufacturer program. Lack of disclosure is ripe for a claim of misrepresentation and deception by both the FTC and plaintiffs’ attorneys.
Certified Inspections are Different than General Inspections Discussed Above
A dealer should be sure that each certified used car in the dealership’s inventory meets the established inspections standards either by its own program or the manufacturer’s. If you have your own program, the program should identify the inspection process and standards for each item to be inspected. Such standards guide the technicians and assure customers that the vehicle is in the best condition possible. For your program, what are technicians certifying and what qualifications do they have? For manufacturer programs, you should be following the program with a manufacturer certified technician doing the Point Inspections and Condition Reports. All inspection reports should be kept by the dealership and a copy provided to the customer. For one manufacturer, their manual requires the inspection report to be kept for a minimum of 7 years. Also, some manufacturers require copies of the warranty service records to be provided to the customer buying a CPO vehicle. Dealers often fail to provide a printout of the warranty service records to a customer buying a manufacturer CPO vehicle with the purchase documents.
Upon inspection, some vehicles may not be able to be certified, and we are not talking about minor dents and dings or a fender that’s been crumpled. We’re talking about a serious accident, flood damaged vehicles, or vehicles that don’t meet the factory standards for certification because they were repaired without genuine manufacturer parts as required under the CPO program. Customers assume that cars that have been certified have not incurred these types of problems. Manufacturer programs outlaw these types of vehicles from being certified and so should your program. Some vehicles may need minor repairs prior to passing a CPO inspection, which can then bring the vehicle into CPO standards. If the minor repairs and parts are permissible under the manufacturer CPO program, the repairs must be made prior to certifying the vehicle.
Buyers Guide
Used vehicles are required to have a Buyers Guide. When the form was changed over 7 years ago, the emphasis of the form was the disclosure of whether there was a dealer warranty. If there is no dealer warranty, but only a franchisor or third-party warranty, the vehicle may only be sold as is or with implied warranties only (depending on state law). If you are providing a dealer warranty on used vehicles, you must state the basic terms of that warranty and what is covered by the warranty. However, the Buyers Guide does not serve as the warranty document. You must have a separate document for the warranty. In some states like Virginia, the Buyers Guide must be signed and dated by the consumer. In states that do not have such a requirement, it is best practice to have the consumer sign and date the Buyers Guide with a copy kept in the deal file.
Warranties
The Magnuson-Moss Warranty Act requires the seller of a consumer product with a written warranty ("a promise made in connection with the sale of a consumer product") to make a text of the warranty readily available for examination by a prospective buyer. Remember, the Buyers Guide cannot serve as the dealer’s written warranty document.
The requirement is satisfied if the dealer either displays the warranty in close proximity to the warranted car or has prominent signage advising prospective buyers of the availability of warranties upon request. If the dealer opts for the latter option, the dealer must furnish the warranty upon request.