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Lemon Laundering This Laundry is Still Dirty

  Norman Taylor & Associates
  September 30, 2009

“It costs a lot to build bad products.” Norman Augustine-“Augustine’s 12th Law”

Just because the magician waves his wand and the rabbit disappears, do not be deceived. The rabbit isn’t actually gone. Just wait a bit, it will reappear, only perhaps this time it will be pink instead of white. This metaphor is surprisingly apt when describing the laundering of lemon vehicles.

Lemon Laundering is an illegal procedure whereby cars that have been taken back by manufacturers under the state lemon laws, are later resold to other consumers as quality used cars. Many states require manufacturers and dealers to disclose to subsequent buyers of buybacks that the vehicle has been repurchased because it was found to have non-conformities under the state lemon law. These states require disclosure of buyback cars, while other states require disclosure only on certain classes of buybacks. Also, some states prohibit reselling within the state any buyback car with a serious safety defect. In addition, the state laws vary as to how the disclosure should be made; some states require the title to be ‘branded’ – a statement placed on the registration that the vehicle is a ‘lemon buy back’ – while other states require other methods of getting the information to the consumer.

The accidental theory of the universe is pleasing to astrologists, romantics and the weak-minded. They are satisfied to live with the strange, serendipitous nature of everything. The average citizen doesn’t need or want the mystery. They must have a properly functioning vehicle to get back and forth to work, take the kids to school and do the other tasks of a modern, mobile life.

If Mr. and Mrs. Jones buy the car in San Francisco, and the brakes mysteriously fail going down Telegraph Hill, following which they end their trip embedded in the front of a flower shop, they do not want to find out later that the same thing happened to their vehicle in Montgomery, Alabama, with similar results. The consumer most certainly does not want to discover that the previous owners sued the manufacturer and the vehicle was officially declared a lemon.

We hear again and again that the previous owners were sincerely worried that someone else might get their lemon car and be killed. Their desire was, if the manufacturer couldn’t fix it, it ought to be scrapped, removing any chance that the vehicle might endanger the lives of others, proving once again that the individual consumer understands personal responsibility.

Here’s the sequence of actions manufacturers use to wash their dirty laundry:

  • Mr. and Mrs. Jones have difficulties with their new car.
  • It stalls unpredictably, sometimes in traffic or on the freeway.
  • They attempt to get the dealer to repair it.
  • The dealer can’t fix it. They don’t tell the buyer that the ECU, the Electronic Control Unit – a Computer, is defective in design and cannot be fixed. In collusion of the manufacturer, the dealership puts the consumer through what we call the lemon gauntlet. The gauntlet is months and months of delays, deception, flim flam and wasted time with no result.
  • The Manufacturer is not going to ‘fess up’ to the non-conformity because it might mean a recall, which may be hugely expensive.
  • The manufacturer uses a variety of deceptive practices to encourage unhappy consumers not to declare their cars as lemons, including ‘giving’ the consumer appreciation certificates, to be used toward the purchase of a new vehicle, usually for several thousand dollars, in the hopes this extraordinary burst of ‘generosity’ will prevent the consumer from demanding the manufacturer buy back its defective vehicle. If the consumer accepts this ‘gift’, the manufacturer could save $10,000, or more in many cases. Good business for the manufacturer and once again the consumer gets screwed.
  • After numerous attempts to get it repaired, Mr. and Mrs. Jones hire an attorney. The manufacturer, after months and months of stalling, agrees to settle.
  • The exchange is made at the Dealership. The owner passes over the registration and the manufacturer passes over the refund check to the consumer.
  • The manufacturer now owns a lemon. What to do? What to do? They could do the right thing, repair it or destroy it, and sometimes they do. Or, they could do the wrong thing. One investigation in North Carolina found that Chrysler laundered over 1000 cars that were declared lemons and resold them as quality used cars.
  • In California the manufacturer must insure that a stamp is affixed to the doorframe, stating that the vehicle is a lemon. Additionally, notification must be made to Department of Motor Vehicles about the cars change of status. This information is added to the Vehicle Registration. Even with all these legal remedies, manufacturers still launder lemon vehicles in California.

The bottom line is that in the absence of these protections, the consumer doesn’t know they are buying someone else’s lemon – a vehicle bought back by the manufacturer because of multiple unresolved repair attempts – because the dealer hasn’t disclosed the information as required by state law.

What can the consumer do? If there is any suspicion, do a CARFAX check. This will disclose the vehicle’s history with previous owners. Find out if there have been problems similar to those currently being experienced. And please be sensible! If you go to the dealer and find a two-year-old vehicle with 8000 miles and it is in perfect shape, remember the rabbit. If it looks too good to be true, it may well be.

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