Vermont’s Lemon Law

Purchasing a motor vehicle is one of the largest and most important purchases consumers make. Most of us, however, have only a basic understanding of how a car operates or how to keep it in good working condition.  When we purchase a vehicle (particularly a used vehicle) or bring it in for repair we find it necessary to put our trust in someone else. Trust that the car we are buying wasn’t damaged in a previous accident, has an accurate odometer reading, and trust that is in good operating condition.  Trust that the repairs made were necessary in the first place, and that the repair will actually fix the problem.

There are some basic steps consumers can take to protect themselves when it comes to purchasing a vehicle; Read and understand the financing contract before signing it; read and understand any applicable warranty; know the seller and their reputation; take the vehicle to a mechanic of your own choosing for an inspection; thoroughly investigate the vehicle history.  In Vermont there is no time period for returning a vehicle if you change your mind after you signed the purchase contract.

When it comes to car repairs, a consumer can also take a few proactive steps to protect themselves: know the mechanic and, perhaps most importantly, get the repair estimate in writing.  There is no law in Vermont that requires a mechanic to stick to a quoted price if it’s not set out in a signed contract. If you are authorizing the garage to only make specific repairs, put it in writing. Ask about parts (will they be new or used) and labor costs- and have it put in writing.

Taking these few simple steps can often prevent problems down the road.  But there may come a time when you are convinced that either a) the car you just purchased is a “lemon” or b) the mechanic is charging you for repairs that aren’t fixing the problem or don’t seem related to the problem in the first place.   In such cases understanding your rights under Vermont’s “Lemon Laws” can help you save time and money.

“The New Motor Vehicle Arbitration Act”- aka Vermont’s “Lemon Law”

It’s important to know that the only “lemon law” on Vermont’s books applies to “new motor vehicles” which are defined as “a passenger motor vehicle which has been sold to a new motor vehicle dealer or motor vehicle lessor by a manufacturer and which has not been used for other than demonstration purposes and on which the original title has not been issued from the new motor vehicle dealer other than to a motor vehicle lessor.” The law generally does not cover consumers who purchase a used vehicle, whether from a licensed dealer or in a private transaction. (Alternative options available to buyers of used cars are discussed below.) Also excluded from the “lemon law” are tractors, motorized highway building equipment, road-making appliances, snowmobiles, motorcycles, mopeds, or the living portion of recreation vehicles, or trucks with a gross vehicle weight over 10,000 pounds.

Vermont’s lemon law requires that all new vehicles sold or leased in the state conform to applicable warranties. The obligation to make sure that the vehicle conforms to warranties rests on the manufacturer, not the dealer. If the consumer notifies the manufacturer or its agent (the dealership) of a nonconformity that substantially impairs the use, market value or safety of the vehicle then the manufacturer is legally obligated to make whatever repairs are necessary. (The manufacturer can delegate responsibility for the actual repairs to the dealer, but ultimately it is the manufacturer who pays for the cost of repairs.) The law further requires the manufacturer to give the consumer a written a) repair order b) summary of the consumer’s complaint and c) an itemized statement of all work done to repair the vehicle.

In many cases the first attempt to repair the vehicle will correct the defect.  But what happens when multiple repairs are attempted and the defect is still not fixed? That’s where the “arbitration” part of Vermont’s “New Motor Vehicle Arbitration” law comes into play. If, after three attempts to repair the vehicle the problem is still not fixed or the vehicle (after one or more repair attempts) is out of service for 30 or more calendar days, then the consumer has the right to choose between a) the dispute mechanism set out in the manufacturer’s warranty (typically arbitration or mediation before a third party neutral chosen by the manufacturer) or b) the Vermont Motor Vehicle Arbitration Board.  The manufacturer has the responsibility of notifying the consumer of the right to choose, and to provide the forms necessary to start the process. There is no fee required for either dispute mechanism. The choice must be carefully made- choosing one form of resolving the matter precludes resorting to the other option later on.

In either case the arbitration/mediation must take place within 45 days of the manufacturer or VT Arbitration Board receiving notice of the consumer’s request for dispute resolution. During the 45 day period the manufacturer has the legal right to make a final attempt at repairing the vehicle attempt.  If the repair is successful to the consumer’s satisfaction, the arbitration process is terminated “without prejudice”- the consumer can restart the arbitration process if the repair fails during the remaining life of the warranty.

It is important to keep in mind that you cannot stop making lease or financing payments because of the defect and unsuccessful attempts to repair it.  In fact the law specifically bars a person who has stopped making payments on the vehicle from the remedy available under the statute.  Stopping payment could feel like the right thing to do, but in the end it will undermine your legal protections.

The VT Arbitration Board consists of five members and two alternates. By law one member of the board must be a new car dealer in Vermont, one member (and one alternate) must be “knowledgeable in automobile mechanics” and the remaining three must be persons “having no direct involvement in the design, manufacture, distribution, sales or service of motor vehicles or their parts.” The Board conducts a hearing by taking testimony from both sides, along with any relevant documents and testimony from witnesses.  The issue for the board to decide is whether the defect substantially impairs the use, market value or safety of the vehicle even after repairs are made by the manufacturer.  The board must issue its decision within 30 days of the hearing.  The board’s decision can be appealed to the Superior Court, but only for very narrowly defined reasons (including corruption/impartiality/misconduct by the board). Otherwise the decision of the board is binding on all parties involved, and a manufacturer’s failure to comply with a decision constitutes an unfair or deceptive act in violation of Vermont’s Consumer Protection law (which potentially increases penalties against the manufacturer.)

Two forms of relief are available to the consumer who prevails before the board.  The consumer has a right to choose to either a) receive a replacement vehicle of a similar make, model and option accessory package or b) return the vehicle to the manufacturer for a refund of the full purchase price.  A reasonable allowance for the consumer’s use of the vehicle prior to the first repair attempt can be deducted from the refund. (The statute sets out a formula for determining a “reasonable allowance.”) In the case of a leased vehicle, the manufacturer could be required to either replace the leased vehicle or refund all lease payments made minus a reasonable use allowance. The manufacturer is allowed to put the vehicle back on the market for sale, but must affix to a window a conspicuous notice that the vehicle was previously adjudicated as having a serious defect. Notice that the vehicle was adjudicated as having a serious defect must also appear on the vehicle’s title.

In the next article we’ll discuss a consumer’s rights when the car in question is a “used vehicle.”