What is a lemon law?

Although ‘lemon’ is commonly used to describe a vehicle that is defective, a lemon law can apply to any product that has a lifespan of more than six months.

PETALING JAYA: Recently, the domestic trade and consumer affairs ministry said it was considering a “lemon law” to protect consumers from becoming victims of fraud or having to bear losses when buying used vehicles.

What is a lemon law, how does it work, and will it be worthwhile? FMT takes a closer look.

What is a lemon law?

In 1975, the US enacted the Magnuson-Moss Warranty Act, which later became commonly known as the first lemon law, according to Cornell University.

The law came in the wake of protests from people whose car warranties had loopholes, enabling sellers to sell “lemons” at “good” prices.

“Lemon” is commonly used to describe a vehicle that is defective but a lemon law can apply to any product that has a lifespan longer than six months, from cars to electrical devices.

Baskaran Sithamparam, senior manager at the National Consumer Complaints Centre (NCCC), explained that the law holds manufacturers responsible for refunding or replacing faulty products.

What does it do?

Lawyer Edwin Tomas said a lemon law would protect consumers from having “little to no recourse from sellers when they are sold defective items”.

Sellers, on the other hand, would have to implement stringent quality control (QC), and possibly insure themselves against the risk of defective items even after stringent QC, Tomas said.

“As a whole, it improves the economy because consumers have more confidence and faith in purchasing items while holding sellers to a higher standard,” he said.

Protecting consumers

As consumers are paying for used vehicles in good faith, Sithamparam said, it is not fair to burden them with a car that does not function as promised.

He said that sometimes, used-car dealers sold vehicles that were defective to buyers who had little mechanical understanding of cars.

In some cases, used cars were falsely advertised as being in better condition than they really were.

“Some even hoodwink buyers by claiming cars are accident-free or have no issues, but when the buyers receive the cars, they are found to be faulty,” he said, adding that by right, the buyers should get their money’s worth.

He said these undisclosed issues often resulted in vehicles needing frequent repairs, rendering them unusable for periods of time, while incurring extra costs.

Liability

Sithamparam said although used-car dealers were not manufacturers, a lemon law should also apply to them.

“It doesn’t matter if they’re selling a variety of cars from different manufacturers, it’s their responsibility to ensure the cars are problem-free and safe to use.

“If the car has any issue, they should inform the buyers, so they can make informed decisions and take the necessary steps,” he said, adding that the price should reflect the car’s value.

In contrast, lawyer Fahri Azzat felt that laying the responsibility for defective products on used-car dealers could be “too onerous an obligation, both financially and technically”.

“It is unfair to place the burden on the dealers as they just sell the car, not make it. Also, they don’t have the technical expertise and equipment that vehicle manufacturers do,” Fahri said.

Tomas agreed, saying that imposing a lemon law on used-car dealers “may be a tad too excessive” whereas imposing it on manufacturers was “just in law”.

Pricier used cars?

He said that enforcing a lemon law on used-car dealers could potentially result in pricier second-hand vehicles, as from a practical standpoint, more stringent QC would require more manpower and man hours.

“And also having to fix or compensate defective items would lead to lower profits, which is often offset by increasing the prices of items,” he said.

Sithamparam disagreed, saying it was unfair to burden consumers with even higher prices. “I don’t see why used-car dealers must increase their prices. They can’t put everything on the consumers,” he said. - FMT