On January 27, the Federal Trade Commission’s (FTC) new Used Car Rule goes into effect. The amended Rule brings some significant changes to the FTC Buyers Guide.
The new Buyers Guide, however, is cleaner in many respects when dealing with dealer warranties, manufacturer warranties, pre-owned warranties, and service contracts. The new form is to be used starting January 27, 2017, but allows dealers to use the existing stock of Buyers Guides through January 27, 2018.
The new Buyers Guide provides a choice of two forms to be used by the dealer. One form provides for the sale of the vehicle “as is,” while the other states “implied warranties only.”
The “implied warranties only” form is designed for use in states where implied warranties apply to a used car sale as a matter of law, and a dealer is precluded from selling the car “as is.” Which form you use will depend upon the state in which you transact business.
The new Buyers Guides may be found in English here:
The Buyers Guide is also available in Spanish at www.ftc.gov/es.
Displaying the Guide
No changes were made to the manner in which the Buyers Guide must be displayed in a vehicle. The Guide must be prominently and conspicuously posted on or in the vehicle, with both sides of the guide visible, on white paper and in black ink.
As before, the Guide must be on the vehicle before it is displayed for sale, or a customer may inspect it for the purpose of purchasing the vehicle. The Guide must be visible and not obstructed by other signage, and not placed in the glove box or under a seat where it cannot be seen.
A Spanish Buyers Guide needs to be posted on the vehicle where a sale is conducted in Spanish, and must be on the vehicle before proceeding with the sale.
The revised Guide includes the following additions:
- A statement in Spanish on the front of the English version of the Buyers Guide alerting Spanish-speaking customers to ask for a Spanish Buyers Guide if one is not already posted on the vehicle.
- Allows a separate section for disclosure of nondealer warranties like remaining manufacturer’s warranty, manufacturer’s used vehicle warranty, and other used vehicle (nondealer) warranties in a clearer and more concise fashion.
- The addition of a separate section to indicate a service contract is available for an extra charge.
- An optional signature line confirming customer receipt of a copy of the Guide posted on the vehicle. Where a customer signature is obtained, the required disclosure (“I hereby acknowledge receipt of the Buyers Guide at the closing of this sale”) and customer signature must appear in the space provided for the name of the individual to be contacted at the dealership for complaints after the sale.
- Airbags and catalytic converters have been added to the list of major defects that may occur in used vehicles (on the back page of the Guide).
- A statement directing the customer to obtain a vehicle history report and check for open safety recalls.
The language directing the customer to obtain a vehicle history report does not obligate the dealership to provide a report. Rather the Guide directs the consumer to safercar.gov for this information.
This notification to the consumer will remain on the Guide even if the dealership provides a vehicle history report to the customer. Absent information called for on the Guide to be completed by the dealer, the Guide itself cannot be modified.
The current Buyers Guide does not clearly give the ability for a dealership to specify that it provides no dealer warranty while disclosing the existence of a manufacturer warranty or service contract. The new Guide, however, clearly delineates who is providing any warranty. For dealers in a state allowing an “as is” sale, where the dealership is not providing any warranty, no information will be included in the dealer warranty section of the form.
For most dealers, any warranty information will be limited warranties required by state law and nondealer warranty information. A properly completed Buyers Guide will now clearly show whether there is a warranty, who that warranty is with, and the type of warranty included.
Sometimes government regulators get things right. The new Buyers Guide appears to be one of those instances, for both the dealer and the consumer. Take a look at the new Buyers Guide, and see how much easier it is to disclose warranty options.
David R. Missimer, [email protected], is general counsel for Automotive Compliance Consultants Inc. He spent 28 years in private practice as a litigator representing lenders, auto dealers, and numerous other entities and individuals. He has worked with dealership compliance issues since 2003 as co-founder of Automotive Compliance Consultants. He is a member of the National Association of Dealer Counsel, American Financial Services Association, and National Automotive Finance Association.