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California Lemon Law

Lemon Law Attorney John Hendrickson


Northern California Lemon Law Attorney John Hendrickson's dealer fraud and lemon law blog is www.StopVehicleFraud.info

Here are some entries from the blog:

Dealership financing and yo-yo scams

I have blogged about yo-yo financing scams before, but a recent scenario has prompted me to add a little more detail.  This typically happens to people that have less-than-perfect credit.  Here’s the scenario:

You go into a dealership.  How you got there is not important (2nd chance program, post-bankruptcy mailer, whatever), but you enter into a financing contract to buy a car.  Someone at the dealership made a decision to make a “spot delivery,” and give you the car because they thought they could get you “financed.”  (Side note – you are technically already financed – by the dealership.  The dealership is assuming they can assign the contract to a bank or finance company.)

In a few days rejection letters start coming in from various banks.  What this typically means is the dealer “shotgunned” the deal and your credit information to several banks – and their initial reaction was to reject.  This does not mean that you will not ultimately be assigned to one of these banks – sometimes the dealership needs to convince them to buy your contract.  All very common.

What you need to watch out for is when the dealership calls you up and then wants to “restructure” the deal.  This is not always a bad thing – it can actually be a good thing.

Good thing:  The dealership managed to get someone to accept you, but just not at the current deal.  Sometimes, this means the “amount financed” is too high.  If you did not purchase a service contract, GAP, theft protection, surface protection, or anything else, then there is only one place where the dealership can go to cut down the amount financed, which is the selling price of the car.  The dealership makes the decision to keep you in the car and make a little less profit.  You win.

Bad thing:  The dealership managed to get a bank to accept you, but not at terms that are favorable to you.  This means that your payment is going up.  The bank will not accept a 60-month contract, but they will take a 48-month contract – your payment goes up.  The bank will not finance you at 9% APR, but they will at 18% – your payment goes up.  The bank will not finance the service contract you wanted – your payment goes down, but now you do not have a service contract.  Sometimes, the dealership did not actually think they could get you financed at 9% APR, but they figured that if you spent a few days in the car, you would get emotionally attached and sign a contract for a higher percentage rate – and a higher payment.  You should be prepared to walk away.

The clause in the contract that gives the dealership an edge because in order to rescind, they have to notify you in writing or by any other means where you get “actual notice.”  It’s bogus because the dealership can just say they called you and told you to bring the car back, but then you have no corroboration.  That means they can rescind the contract or not rescind the contract, it’s all their choice, but that’s a subject for another post.   If the dealership wants to rescind the contract, get it in writing.  Then, if you are presented with another contract, you have the choice of whether to give back the car or buy it.



Leased Vehicles and the California Lemon Law

Common question is whether the Lemon Law gives you rights in California. Short answer is “yes,” but if your vehicle is leased, there can be complications that an experienced Lemon Law Attorney can help you avoid.

One complication can arise when the manufacturer does not repurchase the car, but rather compensates you for your trouble and you keep the car (typically referred to as a “cash & keep”). There is a lot of people that lease a car with the intention of purchasing it at the end of the lease, so they do not pay any attention to the mileage penalties. But if they have had problems with the car, then that changes their plans and instead the car is just surrendered at the end of the lease. Then the leasing company demands the penalties – and there goes all the compensation you received!

There are two express “remedies” under the California Lemon Law – “repurchase” or “replacement,” however each situation is different and with some creative thinking and an eye on the “end game,” a solution can be crafted that benefits you more than just either repurchase or replacement.


What is “limp mode,” and is my car a lemon because it goes into “limp mode?”

Limp mode is when your car or truck protects itself from overheating or damage by restricting engine RPMs, not allowing shifting beyond a low gear (typically 2nd), or governing the speed of the vehicle.  Typical scenarios occur when you are towing with your Dodge Ram truck and the transmission overheats.  The transmission and engine computers will make the determination that you need to slow down or stop while the mechanics cool down. Another example is when your Chevrolet Cobalt fails to drive over 35 mph.   This is different than when your Ford Fiesta or Ford Fusion fails to accelerate when you’re going uphill.  If you have a Ford with clutch packs that get hot and fail to operate, that’s the subject of another blog post.

Your car is in limp mode and you are basically stranded until it lets you move again.  This can be especially annoying if you are not towing, or you are towing something well within the tolerances of the truck.  If you’re towing 2,000 pounds with a Dodge Ram Cummins diesel, the truck should not even notice.  So, you’re stuck.

Here is what you do NOT want to do:  Keep driving the truck or car (unless you or the vehicle are in danger where you are).  Pull over and call roadside assistance.  If you have OnStar – use it!  If you have a Chrysler product with an “assist” button, this is a good time to give that a push.  Get help coming as quick as you can.  Get to the dealership.  If you are on a trip, then call Customer Assistance and ask for “trip interruption” assistance (which is typically a night or two in a hotel, a meal or two, and a rental vehicle).

If your vehicle goes into “limp mode” more than once, you should have your case evaluated by a lemon law attorney.  It is a safety hazard as your vehicle can decelerate VERY QUICKLY, and put you in jeopardy.  An experienced lemon law attorney can help you get your vehicle repurchased, if it qualifies, or at least give you some instructions for taking the vehicle back to the dealership with the hope that it does get fixed.  Either way, you get taken care of and there is usually no charge for the initial consultation (see www.NorCalLemon.com).

My Jeep Wrangler Hardtop Leaks

If you have a Jeep Wrangler with the “freedom top,” which is usually found on the four-door models, and it leaks water, then you may be entitled to compensation.  If you have noticed the seat in your Jeep is wet after rain, or if the top leaks in the carwash, then you should have it inspected by a dealership.  Some dealerships are better than others at fixing these issues, however you do not need to settle for a vehicle that leaks water.

If you have any questions, you should talk to an attorney licensed to practice law in your jurisdiction.  Hendrickson Legal Services attorneys are licensed throughout the state of California.

A tale of RV consignment*

A few years ago I was approached by a young man with a unique problem and a keen instinct.  I was out of town and working remotely when the discussion started. The conversation went something like this:  “I have my RV consigned at a dealership, and the owner told me he sold my RV but can’t pay me everything he owes me.”

After some discussion, I gathered he was owed $27,000.  The dealer was offering to pay him $10,000 in exchange for the title, so the deal could be consummated and the coach delivered to the prospective purchaser.  I later learned the person who was purchasing the motorhome needed the title in order to obtain a check from his bank.  The dealer promised to pay the remaining $17,000 once the check was received from the purchaser’s bank.

The remaining $17,000 never showed up and my client filed suit.  We also filed a complaint with the Department of Motor Vehicles.

The backstory on the “owner,” is that he had someone else help him set up the dealership.  Apparently, this person had a history of setting up motorhome / RV sales & rental stores in other states, like Colorado and Florida.  Then he would convince people to “lend” him their RV’s, either for consignment sale or consignment rental, and pay himself exorbitant sums of money.  In something like a Ponzi scheme, the owner would sell coaches and not pay the owner – at least not immediately.  He would “float” on their money, basically giving himself an interest-free loan.  A loan he never intended to repay.  So here in California, he convinced his girlfriend to get a dealer’s license and he set up shop.  Eventually, he shut the girlfriend out of the business (at least, that’s what her attorney told me).  Once she was served with my lawsuit, she hired an attorney who contacted me.  She turned herself in to the authorities (I believe she started with the DMV investigators), and a judge issued a restraining order to shut the dealership down.

I learned there was about 27 outstanding vehicles that were gone (presumed “sold”), and the owners had not been paid. Some of these coaches were worth over the $50,000.00 dealer bond.  Ultimately, the bond company just posted the $50,000.00 bond with the court to let the court figure out what to do with it.  A very small pie for a lot of aggrieved customers with large appetites (collectively, they were owed over $1,000,000.00).

Luckily, there is a victim compensation fund I was able to help some consumers with.  People who consigned boats were out of luck.  People who were owed more than $35,000.00 were under compensated. People who consigned motorcycles were pretty lucky – we managed to obtained what they were owed without much drama.

The young man with the keen instincts ultimately received all of his money.  Ultimately, this dealership would have failed anyway, but the lawsuit filed on his behalf was the catalyst that hastened the demise of the dealership.  It was also his doggedness that probably let to the criminal charges being filed …. for 25 felony counts of grand theft.

*Based on a true story.  Check back for the name of the dealership, as there is a pending criminal case against this dealer.  I’ve been informed the trial starts 4/21/15.  The dollar amounts listed are not accurate and used for illustrative purposes only.

What warranties come with a used car?

Whether a used vehicle has any warranties is a complicated question. The first place to look is at the “buyers guide.” You can see what that document looks like here.  The Buyers Guide will be marked either “as-is” or “warranty.”  Even if the Buyers Guide is marked “as-is,” that is not the end of the story.

If you purchased a vehicle service contract, then an “implied warranty of merchantability” will apply.  Also, if there is any remaining warranty from the vehicle manufacturer, that will also apply.

If you purchased your vehicle from a “buy-here pay-here” dealership, then you have a 30-day limited warranty, even if you were told you do not.  This typically applies to only to the major mechanical components, but can provide a lot of relief if the vehicle suffers from some catastrophic failure.



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