Federal Register / Vol. 53, No. 95 / Tuesday, May 17, 1988 / Rules and Regulations 17877

APPENDIX E

>) BUYERS GUIDE

IMPORTANT: Spoken promises are difficult to enforce. Ask the dealer to put all promises in writing. Keep this form.

VEHICLE MAKE. MoE. “YEAR VIN HUMBER

DEALER BTOCK NUMBER (Options)

WARRANTIES FOR THIS VEHICLE:

AS IS - NO WARRANTY

YOU WILL PAY ALL COSTS FOR ANY REPAIRS. The dealer assumes Ao responsibility for any repairs regardiesa
of any oral statements about the vahicte. .

\

_. xf WARRANTY

O Fut K LIMITED WARRANTY. The dealer will pay ue of the labor and loth of the parts for
the covered systems that fail during the warranty period. Ask the dealer for a copy, of the war-
ranty document for a full explanation of warranty coverage, exclusions, and the dealer's repair
obligations. Under state law, “implied warranties” may give you even more rights.

SYSTEMS COVERED: DURATION:
* - A one-time $50.00 deductible will apply on repairs.

Engine

Transmission & Drive Shaft
Electrical System

Brake System

Steering Systen

Cooling System

6 months or 6,000 miles,
whichever canes first

O SERVICE CONTRACT. A service contract is available at an extra charge on this vehicle. Ask for details as to
coverage, deductible, price, and exclusions. If you buy a service contract within 90 days of the time of sale, state
law “Implied warranties” may give you additional rights.

PRE PURCHASE INSPECTION: ASK _THE DEALER IF YOU MAY HAVE THIS VEHICLE INSPECTED BY YOUR
MECHANIC EITHER ON OR OFF THE LOT.

SEE THE BACK OF THIS FORM for Important additional Information, Including & list of some major defects that
may occur In used motor vehicles.



Ne

et

Federal Register / Vol..53, No. 95 / Tuesday, May 17, 1988 / Rules and Regulatians 178671
A AAR ACN

“aon BUYERS GUIDE

IMPORTANT: Spoken promises are difficult to enforca. Ask the dealer to put ait promises in writing. Keep this form.

VEHICLE MAKE MODEL YEAR VIN NUMBER

DEALEA STOCK NUMBER (Optionay

WARRANTIES FOR THIS VEHICLE:

AS IS - NO WARRANTY

YOU WILL PAY ALL COSTS FOR ANY REPAIRS. The dealer assumes no responsibility for any repairs regardiess
of any oral statements about the veulcle.

X{ WARRANTY

FULL OC LIMITED WARRANTY. The dealer wili pay _-__% of the labor and___% of the parts for
the covered systems that fall during the warranty period. Ask the dealer for a copy of the war-
ranty document for a full explanation of warranty coverage, exclusions, and the ler's repair
obligations. Under state law, “implied warranties" may give you even more rights.

SYSTEMS COVERED: DURATION:

. The manufacturer's original warranty
has not expired an this vehicle. Consult 4

service_locations, etc

O SERVICE CONTRACT. A service contract Is available at an extra charge on this vehicle. Ask for detalla a3 to
coverage, deductible, price, and exclusions. If you buy a service contract within 90 days of the time of sate, state
law “Implied warranties” may give you additional rights.

PRE PURCHASE INSPECTION: ASK THE DEALER IF YOU MAY HAVE THIS VEHICLE INSPECTED BY YOUR
MECHANIC EITHER ON OR OFF THE LOT.

SEE THE BACK OF THIS FORM for important additional information, Including a list of some major defects that
may occur In used motor vehicles. :


il!

eZ

Federal Register / Vol. 53, No. 95 / Tuesday, May 17, 1988 / Rules and Regulations
a

17661

Soo]

two-sentence disclosure in the sales
contract informing the purchaser that, in
the event of any inconsistency between
the Buyers Guide and the sales contract,
the information on the Buyers Guide will
govern. The Rule also requires dealers
to give a copy of the Buyers Guide
reflecting the final warranty terms to the
purchaser.

When the used car transaction is
conducted in Spanish, the Rule requires
that the dealer display a Spanish-
language version of the Buyers Guide on
the vehicle prior to offering the vehicle
for sale. The Rule includes a text for the
Spanish-language version.

‘These guidelines explain the Rule's
requirements, section by section. The
discussion includes illustrations of how
the Rule applies in specific fact
situations that are faced by many
dealers. If further compliance questions
arise, dealers may seek an‘informal staff
advisory upinion,‘ or if appropriate, a
forma] advisory opinion from the
Cummission, ag provided for in Section
1.1 through 1.4 of the Commission's
Rules of Practice, 16 CFR 1.1-1.4.

Il. What Transactions Does the Rule
Cover?

Cenerally, all sellers of used vehicles
are covered by the Rule, except those
who sell, or offer to sell, fewer than six
{6} used vehicles in a twelve month
period. A used vehicle is any car, light-
duty van or light-duty truck that has
been driven more than the distance
necessary for test driving or moving the
vehicle prior to delivery to a consumer.

‘The following definitions, included in
the Used Car Rule, provide more
detailed information as to the persons,
firms, and vehicles that are covered by
the Rule. The Used Car Rule does not
affect the definitions of terms in state
Jaw such as “dealer,” “used vehicle,”
“new vehicle,” or “vehicle.” Likewise,
state law definitions of the specific
terms set out in § 455.1(d) of the Rule
have no effect on the Used Car Rule.

A. “Vehicle” Defined—Section
455.1(d){1)

For the purposes of the Rule, a
“vehicle” is defined as “any motorized
vehicle, other than a motorcycle, with a
gross vehicle weight rating (GVWR) [the
loaded weight] of less than 8,500 Ibs., a
curb weight [the weight of an unloaded
vehicle] of less than 6,000 Ibs., and a
frontal area of less than 46 sq. ft." Thus,
the Rule covers automobiles, including
“classic cars,” as well as most light-duty
vans and light-duty trucks. Due to the

* Staff may be contacted at the address listed in
the beginning of these guidelines, under the heading
“For further Information.”

limit on the vehicle size built into this
provision, large trucks and recreational
vehicles generally are not covered.

Staff believes the Rule also does not
apply to the sale of tractors, combines,
tillers, and other vehicles that are
designed primarily for agricultural use,
but which meet the definition of the term
“vehicle” that is set forth in the Rule.
Motorcycles are not covered by the
Rule. Staff believes that mopeds, like
motorcycles, also are not covered by the
Rule.

B. “Used Vehicle” Defined—Section
455.1(d)(2)

Under the Rule, the term “used
vehicle” includes all vehicles that have
been “driven more than the limited use
necessary in moving or road testing a
new vehicle prior to delivery to a
consumer.” This definition, therefore,
includes demonstrators and company
cars.* However, a vehicle sold as scrap
or for its parts and not as an operating
vehicle is specifically excluded from the
definition of used vehicle, if the dealer
surrenders any title documents to the
appropriate state authority and obtains
a salvage certification. [lustrations 2.5
and 2.7 discuss the application of the
Rule to demonstrator vehicles.
Illustration 2.6 discusses how the Rule
applies when a vehicle is transferred
from one dealer to another.

C. “Dealer” Defined—Section 455.1(d)(3)

Under the Rule, the term “dealer”
includes any person or business that is
presently selling or offering for sale a
used vehicle, after having sold or offered
for sale five or more used vehicles
during the previous twelve months. In
other words, a person or business
becomes a “dealer,” for purposes of the
FTC Used Car Rule, upon offering for
sale the sixth used vehicle in twelve
months. The Rule does not impose any
requirements on persons or businesses
that offer fewer than six used vehicles
for sale in twelve months. Ilustrations
2.1 and 2.2 discuss this provision of the
Rule.

The Used Car Rule's definition of
“dealer” specifically excludes banks
and financial institutions selling used
vehicles. However, the Rule applies to
the retail sale of used vehicles by
affiliates and subsidiaries of banks or
financial institutions. Illustration 2.11
discusses the application of the Rule to

anks,

* As used in these guidelinus, the term
“demonstrator” refers to "new" vehicles that have
never been sold to a retail customer, but have been
driven for purposes other than teat driv.
moving. This may include use by the dealer, the
dealer's employees, the dealer's corporate officers,
or anyone else.

Section 455.1(d)(3) of the Rule also
excludes salee of used vehicles by a
business to its own employees. In
addition, the term “dealer” excludes a
lessor offering to sell a leased vehicle to
any of the following parties: (1) The
lessee; (2) an employee of the lessee; or
{3) a buyer procured by the leasee.*
Sales and offers for sale by lessors to all
other parties are covered by the Rule. If
8 lessee offers {cr sale (other than to its
employees} more than five leased
vehicles within a twelve month period,
the lessee most comply with the Rule
because the lessee fits the definition of
“dealer” and ia not apecifically
excluded. Illustration 2.8 discusses how
the Rule applies to the sale of leased
vehicles,

D. “Consumer” Defined—Section
455.2(d){4)

For purposes of the ised Car Rule, the
term “consumer” is broadly defined to
include any person whe is net a used
vehicle dealer. Section 455.2(a) of the
Rule requires you (the dealer) to prepare
and display a Buyers Guide before
offering to sell « used vehicle toa
consumer. In the Statement of Basis and
Purpose, the Commission indicated that
the term “consumer” also includze email .
businesses. 49 FR 25892, 45708 (1984). if
you are offering te sell a used vehicle
only to another deeler, the Rule does not
apply tc the sala of that vehicle.
Mlustrations 2.9 anc 2.4 highlight this
provision of the Rule.

E. Consignment Sales

Before you offer to sell a used vehicle
that you have on your lot through a
consignment, power of attorney or other
such agreement, the Rule requires you to
prepare and dispiay a Buyers Guide.
The point to remember is that whenever
you, the dealer, offer to sell a used
vehicle to a consumer, you are
responsible for making sure that there is
full compliance with the Rule. If you are
a dealer who consigns a car to another
dealer for sale to a consumer on your
behalf, both you and the other dealer
are responsible for complying with the
Rule.

F. Auctions

The Rule does not apply if you offer to
sell a vehicle through an auction that ie
open only to other dealers. It does apply
when your vehicles are offered for sale
at an auction that is open to
consumers.”

* See Statement of Baels and Purpose, 49 FR at
45708.

7 See 52 FR 34765 (1987) (Commission declined ta
exempt from the Used Car Rule sales te consumera
of used vehiclee at auctions that ere open to
consumers.)


WO)

Federal Register / Vol. 53, No. 95 / Tuesday, May 17, 1988 / Rules and Regulations 17675
_ hd

_ BUYERS GUIDE

IMPORTANT: Spoken promises are difficult to enforce. Ask the dealer to put all promises In writing. Keep this form.

VEHICLE MAKE MODEL YEAR VIN RUSSER

DEALER STOCK NUMBER (Optional

WARRANTIES FOR THIS VEHICLE:

OR ANY REPAIRS. The dealer assumes no responsibility for any repa
t the vehicle.

xl WARRANTY

C1 FULL LIMITED WARRANTY. The dealer will pay 75% of the labor and 75 % of the parts for
the covered systems that fall during the warranty perlod. Ask the dealer for a copy of the war-
ranty document for a full explanation of warranty Coverage, exclusions, and the dealer's repair
obligations. Under state law, “implied warranties” may give you even more rights.

SYSTEMS COVERED: DURATION:

Engine - 90 days or 3,000 miles, whichever

comes first

O SERVICE CONTRACT. A service contract Is available at an extra charge on this vehicle. Ask for details as to
coverage, deductible, price, and exclusions. If you buy a service contract within 90 days of the time of sale, state
faw “Implied warranties” may give you additional rights.

PRE PURCHASE INSPECTION: ASK THE DEALER IF YOU MAY HAVE THIS VEHICLE INSPECTED BY YOUR
MECHANIC EITHER ON OR OFF THE LOT. :

SEE THE BACK OF THIS FORM for important additional Information, Including a list of some major defects that
May occur In used motor vehicles.


17666
ee

Federal Register / Vol. 53, No. 95 / Tuesday, May 17, 1988 / Rules and Regulations
— -

Illustration 2.6: You are a dealer who
sometimes “transfers” or “trades” new
~~ vehicles with another dealer go that you
jean provide your customers with the
__” exact car that they want. Do these trade
cars have to display a Buyers Guide
*efcre you can offer them for sale to a
consumer?
“Ey te cply he eding @ Gus with
another dealer you have only
accumulated mileage for the purpose of
delivering the vehicle to the consumer.
Therefore, the car would not be a “used
vehicle" under the Rule. Section
455.1(d)(2).

illustration 2.7: Same as 2.6 above,
except that the first dealer drove the
vehicle as a demonstrator before trading
it to you. Does the traded car have to
have a Buyers Guide before it can be’
offered for sale to a consumer?

Yes. if the vehicle was used as a
demonstrator at any time, it must have a
Buyers Guide in its side window before
it can be offered for sale to a consumer.
Section 455.1(d}(2).

Jlustration 2.8: You are a dealer who
also leases vehicles. You lease a car to
Jones, who is not a dealer. At the end of
the lease term you offer to sell the car to
Jones. Must you prepare a Buyers Guide
for this vehicle?

No. Although you are a used vehicle

/ dealer, the Rule does not cover
stations in which you sell or offer to

_/ sell the leased vehicle to the lessee, to
an employee of the lessee, or to a buyer
who is found by the lessee. Thus, you
would not have to comply with the Rule
if you offered to sell the car to Jones (the
lessee) or to an employee of Jones. In
addition, you would not be required to
display a Buyers Guide if Jones’ next
door neighbor asked Jones about buying
the car. But, if you reclaimed the car at
the end of the lease term and then
offered it for sale to the public, the Rule
would apply. Section 455.1(d)(3).

Illustration 2.9: You are a used vehicle
dealer who sells vehicles, from time to
time, at auctions. These auctions are
open only to other dealers. The only
advertisements for these auctions are in
trade journals. Are these sales covered
by the Rule?

No. Selling at an auction that is open
only to other dealers is just like a non-
auction sale to another dealer: the Rule
does not apply. Sections 455.1(d)(3),
455.2(a).

Illustration 2.10: Same as 2.9 above,
but instead the auctions are open to
consumers. Are these sales covered?

* Yes. Before your used vehicles are

~~. oftered for sale, sold, or made available

\ for inspection at an auction that js open

/ to consumers, you must prepare and
display a Buyers Guide as required by
the Rule. If the vehicle is sold to a

consumer, you must comply with the
other requirements of the Rule, just as if
you had sold the vehicle from your
regular place of business. If your used
vehicle is sold at the auction to another
dealer, you need not comply with
respect to that particular yehicle. .

Mlustration 2.11: In your state, banks
and financiai stitutions may own or
operate general businesses as separate
entities. You operate & retail used
vehicle dealership that is owned in part
by a bank. Must you comply with the .
Rule?

Yes. The Rule is intended to cover all
used vehicle dealers, regardless of
ownership. However, banks and
financial institutions that directly offer
to sell used cars are not covered by the
Rule. Section 455.1(d)(3); Statement of
Basis and Purpose, 49 FR at 45708.

Preparing the Buyers Guide

Jlustration 3,1: You are offering a
used vehicle for sale in a state that-
prohibits you from selling used vehicles
“as is.” Do you have to replace the “As
Is—No Warranty” disclosure with the
“Implied Warranties Only" disclosure
on the Buyers Guide?

Yes. The “Implied Warranties Only”
disclosure must appear on the Buyers
Guide in place of the “As Is—No
Warranty" disclosure if: (1) the vehicle
is offered for sale in a state which
prohibits “as is" sales; or (2) you decide
to offer implied warranties, but no other
warranties. In states that prohibit “as
is” sales, the “Implied Warranties Only”
heading must appear on the form even if
you offer an express warranty. If you do
offer a warranty you would leave the
box next to “Implied Warranties Only”
blank, check the warranty box, and fill
out the rest of the warranty portion of
the Buyers Guide. See Appendix A for
an example of a Buyers Guide
incorporating the “Implied Warranties
Only" disclosure. Section 455.2(b)(1)(ii).

Illustration 3.2: You offer all-your used"
vehicles for sale on an “as is" basis.
Under the laws of your state, you must
prepare a warranty disclaimer form,
using specific language required by state
law, and have the buyer sign the form.
Can you display that form instead of the
Buyers Guide?

No. The state law requirement does
not affect your obligation to prepare and
post a Buyers Guide on the used vehicle,
nor will the Buyers Guide substitute for
a state-required form. The Used Car
Rule does not affect your obligations
under state law, so you still must ~
comply with all applicable provisions of
state law, including warranty disclaimer
requirements. Sections 455.2(a),
455.2(b)(1)(i). .

Illustration 3.3: You are a dealer who
is offering a used vehicle for sale and
you want to offer a warranty on the
vehicle. You would like to warrant only
the engine, transmission and drive shaft,
differential and elgetrical systems, and
you would like to disclaim any
warranties, express or implied, on the
other systems of the vehicle. Can you
indicate this dieclaimer on the Buyers
Guide?

Yes. Mark the large box to indicate
that a warranty is offered on the vehicle.
Indicate whether the warranty is “full”
or “Itmited." #5 Fill in the lines to show
what percentage of parts and labor you
will pay for repairs to covered systems.
Beneath the warranty disclosure, fill in
the list of covered systems, and.the
duration of the warranty coverage for
each covered system. Below that, you
may indicate that you disclaim all
warranties, express or implied, on other
systems or parts of the vehicle. OF
course, you still must describe the
warranty in a separate warranty
document, including the systems
covered and the systems not covered.
This requirement is more fully discussed
in Section IV(B) of these guidelines.

Be careful to check your state's laws
for any restrictions that might apply to
disclaimers of express warranty
coverage or disclaimers of implied
warranty coverage.

Ilustration 3.4: You are a dealer who
is offering a warranty on a used vehicie.
The warranty that you offer covers less
than 100% of the cost of labor and parts
for the systems covered. Is this a “full”
warranty?

No. A “full” warranty is one which
meets the minimum standards for a
warranty under Section 104 of the
Magnuson-Moss Act, 15 U. 2304. All
other warranties are called “limited.” In
the example provided in this illustration,
the warranty covers less than 100% of
the repair costs of the covered systems, |
and thus does not meet one of the ‘
elements of a “full" warranty. The
elements of a "full" warranty are
discussed more completely in the text
that accompanies footnote 8, supra.
Section 455.2(a)(2)(i).

Jlustration 3.5: You are a dealer who
wishes to previde a warranty covering
all vehicle systems shown on the
reverse of the Buyers Guide. Under
“systems covered” in the warranty
section of the Buyers Guide, can you
write “all systems shown on reverse cf.
the Buyers Guide"?

Yes. To indicate that your warranty
covers all systems shown on the reverse

8 See supra text accompanying note B for 8
discussion of the terms “full” and “limited.” |


Federal Register / Vol. 53, No. 95 / Tuesday, May 17, 2988 / Rules and Regulations
——

17683

(1) You provide warranty service ta
anyone who owns the vehicle during the
warranty period, when they report a
problem.

(2) You provide warranty service free
of charge, including such costs as
returning the vehicle or removing and
reinstalling a “covered” system when
necessary.

(3) You provide, at the consemer’s
choice, either a replacement or a full
refund if you are unable, after a
reasonable number of tries, to repair the
vehicle.

(4) You do not require consumers to
perform any duty as a precondition for
receiving service, except notifying you
that service is needed, unless you can
demonstrate that the duty is reasonable.

(5) You do not limit the duration of
imphed warranties.

If any one of these statements is not
true, then your warranty is “limited.” A
“limited” warranty tells your customers
that there are some costs or
responsibilities that you will not cover
for the specified systems.

A “full” or “limited” warranty need
not cover the entire vehicle. You may
give a “full” warranty on some systems,
and a “limited” warranty on others. If
most systems are covered by a “limited”
warranty, check the limited warranty
box, aad list which syatems will be

covered by a full warranty. See

Illustration 3.4 for an additional
discussion of this issue.

Second, fill in the percentage of the
tepair cost that will be paid by the
dealer. For example, “The dealer will
Pay 100% of the labor and 100% of the
parts * * *.” ® See Llustration 3.6 for a
discussion of how the Rule applies to
the use Of a deductible. Section
455.2(b}(2){iv).

Third, indicate which of the specific
systems are covered. Do not use

shorthand terms such as “drive train” or ~

“power train”. Rather, indicate the exact
systems (e.g., frame and body, brake
systems, etc.) that are covered. A list of
thé major systems of an automobile is
Printed on the back of the Buyers Guide.
Those terms may be used to indicate the
specific systems covered by the
warranty. [lustration 3.5 provides an
explanation of how to disclose the
systems covered. Section 455.2(b)(2)(ii).

Some dealers may wish to provide
warranty coverage for some systems of
a used vehicle and at the same time

limited.” Rather, deelers may simply cross
end “limited,” leaving just the
” However, atl other provistons of
the Used Car Rule apply to sates of auch vehicles:
° The Used Car Role does not require that a
dealer-pay eny specific percentage of repair or labor
figure in the exemple is provided only for
illustration.

disclaim aff other express or implied
warranty coverage for the other systems
of the car. A dealer may use the space
provided for warranty disclosures to
write in arty disclaimers or exclusions.
You may enlarge the Buyers Guide, if
necessary, to provide additional
warranty information. Mustration 3.3
further discusses this issue.

Fourth, indicate the duration of the
warranty. For example, “30 days or 1,000
miles, whi occurs first.” If there
are different durations for different
systema, write out each different
duration. if the duration of the warranty
is the same for all systems covered by °
the warranty, you need only write the
duration once. Section 455.2(b){2){iii).

d. Unexpired Manufacturer's.
Warranties, If you choose, you may
disclose unexpired manufacturer's
warranties in the warranty section of
the Buyers Guide. To disclose that a
manufacturer's warranty still applies on
a used vehicle, staff suggests that
dealers use one of two methods,
depending on whether the dealer offers
a warranty in addition to the unexpired
manufacturer’s warranty. Section
455.2(b)(2){v).

First, if additions! warranty coverage
is not offered by the dealer, the dealer
should check the laxge box to indicate
that a “warranty” is affered, and then
simply fill in (with a rubber stamp, if
desired) the following statement, which
is set forth im § 455.2(b)(2)tv):

MANUFACTURER'S WARRANTY STL
APPLIES. The manufacturer's original
warranty has not expired on the vehiele,
Consult the manufacturer's warranty booklet.
for details as to warranty coverage, service
location, etc. .

Separately, and beneath that
statement, the dealer may add the”
following language, but only if permitted
by state law to eell a used vehicle on an
“as ia” basis:

The dealership itself essumes no
Tesponsibility for any repairs, regardless of
any oral statements about the vehicle. All
warranty coverage comes from the unexpired
manufacturer's warranty.

An example of a completed Buyers
Guide with this language is included as
Appendix B to these guidelines. .

Second, if a dealership warranty is.
offered and the dealer also chooses to
disclose the unexpired manufacturer's

-warranty, the dealer should: (1) Mark

the large box to indicate that a
“warranty” is offered, and fully
complete the rest of the Buyers Guide'a
warranty section, indicating whether the
dealer's warranty is full or limited, what
Percentage of parts and tabor are
covered, the systems covered, and the
duration of coverage, as required by

§ 455.2(b) of the Rule; and (2) fill in (with
a rubber stamp, if dasired) the
unexpired manufacturer's warranty
statement below the dealer's warranty
disclosure. An example of a completed
Buyers Guide with this language is
included aa Appendix C to these
guidelines, _

e. Mandatory Warranties. Although
the Used Car Rule does not require
dealers ta disclose on the Bayers Guide
warranties that are the tespanaibility of
another party, such as the manufactuser,
the Rule does require dealers to diaclase
information about all warranty coverage
that they provide. Therefore, if federal,
state, or local laws require you to give a
specific warranty on a used vehicle that
you offer for sale, you must briefly
describe this on the Buyera
Guide.?© Section 455.2(b}{2). This
warranty information should be
included ih the “systems covered/
duration” portion of the Buyers Guide. If
necessary, you may enlarge the “syatem
covered/fivationTM portion of the Buyers
Guide to accommodate additional
warranty information. Yox alec mast
fully comply with disclosure

+ Tequirements of the state os local law.

For example, you must comply with a
state or local law that requires you to
give the consumer a separate warranty
document.!? .

4. Service Contract Avaitebility

A “service contract” is defined in
Section 455.1(d){7) of the Used Car Rule
as “a contract in writing for any period
of time or any specific mileage ta refund,
Tepair, replace, or maintain a used
Tphicle [which is}, provided a an extra
charge beyand the price o} used
vehicle.” (emphasis added}. Although a
warranty also may provide such
protection it is distinguishable from a
service contract because it is provided
at no extra charge beyond the price of
the vehicle.

If you offer a service contract ox a
Particular vehicle, § 455.2(b}{3} requires
you te mark the box provided on the
Buyers Guide, next to the following
disclosure:

SERVICE CONTRACT. A cervice contract
is available at an extra charge on thie vebicts,
Ifyou buy a service contract witlzin 89 days of
the time of sale, state law “implied
warranties” may give you additional rights.

*° For one example, see New York General
Business Law Section 198-b. Thia provision of New
York law requires daatere to give consumers written
warranties covering sevem mechanical ovelems af
any used vehicle that is sold fer over $1,600.

+1 See, eg, New York General Business Law
Section 198-b(b).


17662 Federal Bagister / Val.
hechilentiaie nals

BS.

No, 5 / Tuesday, May 17, 1988 / Rules end Be;

The auction company is also covered
by the Rule if it has aaid or offered to.
sell six or more used vehiclee to

\, Consumers within a twelve month

) period. In.this case, as with consignment
sales, both you and the auction
~sPaay are responsible tor complying
with the Rule. See Ilustrations 2.6-2.10
5 "cher iiicc. jun of sales through
auctions.

G. Where Does the Rule Apply?

‘The Used Car Rule was issued by the
FTC based upon two sources of
uuthority: Section 109(b) of the
Magnuson-Moss Warranty Act, 15
U.S.C. 2309(b), and sectian 18 of the
Federal Trade Commission Act, 15.
U.S.C. 57a. These Acts apply in all 50
states, the District of Columbia, the
Commonwealth of Puerta Rico, the U.S.
Virgin Islands, mand American
Samoa. 15 U.S.C, 2301(15). In addition,
the Rule cove
the Linited States f at military
post exchanges. 16 CER 700.1(i).

Therefore, with the exceptions of
Wisconsin and Maine, which have been
granted statewide exemptions, the Used
Car Rule applies in each of these
jurisdictions. The Commission granted
these exemptions under § 455.8 of the
the the
in each state “affords an
verall level of protection to consumers
hat is as greet as, or greater then, that
‘afforded by the Used Car Rule." 51 FR
20936, 20943 1986); 43 PR 16390, 16304
(1968).

HI. The Buyers Guide
A. General Informa:

relevant lau

mo

ion

Section 485.2 of the Rule requires
dealers tu prepare and display a
window sticker called the "Buyers
Guide" before offering a used vehicle for
sale to a consumer. The Buyers Guide
must disclose whether any warranty is
offered and the basic terme of any
warranty. If the dealer‘does not provide
an express warranty, then the Buyers
Guide must indicate thai the vehicle is
being offered for sale “as in" (with no

express or implied wervanties), or with
only the appheebt ied warranties"
required Ly state fa ich of these

terms is explained on the Buyers Guide.
The Buyers Guide also includes
several additional disclosures, including:
A list of the fourteen maior systema of
an eutomobile and defects that can
Occur in these aysiems; a suggestion that
consumers ask ¢ lealer if a pre-
purchase inspection ia permitted: and a
—— warning against relizi.ce on spoken
Fomises thet are het confirmed in
vriting. Finally, at the tine of gale, the
—“Gealer must suyer the origingl

Buysrs Guide (or an accurate copy) that
wae.dispiayed an the vehicle. This
Buyere Guide must reflect the final
warranty terms agreed on between the
buyer and seller.

B. Preparing the Buyers Guide

Section 455.2(a) of the Rule explains.
how to fill in the Buyers Guide. You
must complete four different parts.of the
preprinted Buyere Guide: (1) Vehicle
information; (2) warranty information;
{3) servce contract availability; and (4)
dealer identification and consumer
complaint information.

1. Buyers Guide Format-—Section
455.2{a)

The Rule requizes dealers to use the
exact format for the Buyers Guide that is
shown in the Rule. The text of the Rule
contains a model Buyers Guide, in both
English end Spanish, and also providee
specific printing inetructions. Dealers
may print their own Buyers Guides or
get copies from sny other source, such
as trade associations and from

anies.

All Buyers Guides must comply
exactly with the standardized wording,
type style. type size, end format
required by the Rule. Section 455.2(a)(2)
of the Rule requires that the Buyers
Guide be printed in 100% black ink on
white stock that is at least 11 inches
high and 7 % inches wide. Dealers also
may post a completely separate window
sticker to make other truthful and non-
deceptive information known to the
conaumer, es long as that information
does net conflict with the Buyers Guide
and the sales contract.

2, Vehicle Informntion—Section 455.2{a)
In the epsces provided at the top of
the Bnyere Guide, fill in the vehicle
make, model, model year, and vehicle
identification number (VIN). You may
write in a dealer stock number in the

space provided or you may leave this
space blank.

‘No Warranty" version. 1f
you sicle “as is," which means
without any express or implied
warranties. mark the box provided next
to the “Aa Ia—No Warranty” disclosure.
The Used Car Rule does not affect any
state law that requires you to use
epecial language or a separate form-to
make an effective “as is" sale, "As is”
disclosuies will excuse you from
lisbility under state Jaw only if you
follow state law requirements for
migking the diaclosure. Dlnatration 3.2
further discusses this pertion of the
Rule

b. “implied Warranties Only" version.
Some states limit or prohibit the sale of
used vehicles “as is." The Used Car Rule
does not override such state laws. In
those states §, 455.2(b)(1)(ii) of the Rule
requires you {to use the version of the
Buyers Guide containing the following
“Implied Warranties Only” heading
instead of the “As Is—No Warranty"
heading:

Implied Warranties Oniy. This means that
the dealer does not make any specific
promises to fix things that need repair when
you buy the vehicle or after the time of sale.
But, state law “implied warranties” may give
you some rights to have the dealer tuke care
of serious problems that were not apparent
when you brought the vehicle,

If you are not offering an express
warranty, the “Implied Warrarties
Only” box raust be checked. Hf you offer
erranty. check the

nm you
only implied warranties. !
allows “as is" cales for some, but not all,
used vehicles, you msy use an "As Ja—
Ne Wasrenty” Buyei ¢ on those
hat the slate will aliaw you to

Gu

hi the “implied
ly" heading are available
trom .he same sources that supply the
“As la—No Warranty" version of the
Buyers Guide. Alternatively, dealers
could have the “Implied Warranties
Only” disclosure printed on labels, and
then simply affix these labels to the
Buyers Guide, covering up the "As Is.
No Warranty" state. Ulustration 3.1
discuuses use of Buyers Gui:
“implied Warrautias Oniy” bi
Appendix A giver an exan
“Implied Warranties Only” Buvers
Guide.

c. Filling in the Warranty Faction of
the Buyers Guide. Dealers who offer 4
warranty on the vehicle must mark the
large box next te the word “warranty,”
and complete the other parts of the
werranty section of the Buyers Guide,
Section 465.2(b}. First, mark one of the
ernaller boxes to indicate w' v the
werranty offered 3 “Full” or "Limited."
Section 455.2(b)(2Mi). Under federa! lew
your warranty ie “full” if each ct the
following five ststements about y:
warranty's terme and conditions is
true:*

® These stundants ere s
Magauson-Moas Warranty Act 16 €
Magnnson-Maae Ai not apply
sornutactured belore luly 4, 2975,
offering such vehicles for sale, deelere
required to indicele whether tha warranty offered 18
Continued

out in sectiun 105 of the



17678

Federal Register { Vol. 53, No. 95 / Tuesday, May 17, 1988 / Rules and Regulations

Below Is a Het of some major defecte that may occur In used motor vehicles.

| Frame & Body
Frame-cracks, corrective welds, or rusted thesugh
Dogiracks—bent or twisted frame

Engine .
Gil leakage, exuding normal seepage
Cracked block or head
Belts missing or Inoperable
Knocks or misses reisted to camshaft lifters and

push rods:
Abnormal exhaust discharge

‘Transmission & Drive Shaft
Improper fluid level or leakage, excluding normal

seepage
Cracked or damaged case which |s visible
Abnormal noiea of vibration caused by faulty

transmission or drive shaft .

Improper shitting or functioning in any gear
Maral clutch slips or chatters

Differontal
improper fiuid level or teakage excluding normal

Crackad’or damaged housing which le visible
‘Abnormal noise of vibration caused by faulty

Cooling System

Improperly functioning alternator, generator,
battery, or starter

/— > Fuel System

y

No

Visible leakage
)

le Accessories,
Gauges or warning devices
Air conditioner .
Heater & Defroster

ti
if
E
Hy

hock absorber tesking or functioning Improperty
neh
repairs

ty
i
i

i
i
J

!
i

X¥Z Auto Sales, Inc.

OAALER
123 Main Street
z -
Anytown, U.S.A. 01234
Ms. Smith, Used Car Sales Manager- (123) 456-7890 _

BEE FOR COMPLAINTS

., IMPORTANT: The Information on this form Is.

part of any contract to buy this vehicle. Removal of this label before

\ consumer purchase (except for purpese of test-driving) Is a viotation of faderat Jaw (16 C.ER. 455).

[FR Doc. 68-1101 Filed 5-16-88; 8:45 am]
BILLING CODE 4750-01-C


Federal Register / Vol. 53, No. 95 / Tuesday, May 17, 1908 / Rules and Regulations

2768S

RE SS SA a RES SEE ESE SETS

“Some states do not allow the exclusion
or limitation of incidental or
consequential damages, se the above
limitation may not epply te you.”

(11) Indicate who is covered by the
warranty, if you choags to limit the
coverage. For example, “warranty
covers only the original purchaser” or
“commercial use excluded.”

Put into the warranty document
everything that you will do and
everything that you expect your
customers to do under the warranty.
Make sure that your customers can find
each item of information in the warranty
easily.

The Federal Trade Commiasien haa
prepares] several publications that alsa.
may help you to comply with the lews
and regulations governing warranties.
“Writing Readabke Warranties” is
available for $2.00, from the
Superintendent of Documents,
Washington, DC 20402, GPO Order #:
018 -000-400363-1. "A Businessperson's
Guide to Federal Warranty Law,” GPO
Oider #; 018-000-00324-4, is available
for $1.50, also from the Superintendent
of Documents. A supplement to that
publication, containing the relevant
statutes and regulations, is available at
no charge from the Publications Branch,
Federal Trade Commissioa,
Washington, IC 20580.

You may also want to cansult your
lawyer to be sure that yeur warranty
meets all the requirementa of both
Federal and state ews.

V. Contrary Statements—Sectien 455.4

Section 455.4 of the Rute prohibits
dealers from making “any statements,
oral or written, or takfing} other actions
which alter or contradict the
required by §§ 455.2 and 455.3 (of the
Rule)” For example, you may not write

at there is a warranty on the Buyers
Guide, but disclaim all warranties in the
contract of sale. As discussed in section
TV(A) of these guidelines, the
information om the Buyere Guide
supercedes contrary information in the
contract, under § 455.3(b} of the Rule.
However, staff does net interpret § 455.4
to mean that the Used Car Rule
prohibits a dealer from repairing a
vehicle that was sold “as is."

VIL State Exemption Petitions—Section
455.6

‘The Used Car Rule includes a specific
provision that sets out the standarde for
granting statewide exemptions from the
Rule. This provision States thet the Beed!
Car Rule will not be in effect in a atate,
to the extent specified by the
Commission, where:

(1) There is a state requirement fm
effect which applies to any transaction
to whieh this ride applies, and

(2) That state requitement affords an
overalf level of protection to consumers
which is as great as, or greater than, the
protection afforded by [the Used Cax}
Rule; ° * * for as tong as the State
admintsters and enforces effectively the
state requirement. .

Final staff guidelines for state
exemption petitions have been
developed for the Commission's Trade
Regulation Rule Concerning Funeral
Industry Practices, 16 CFR Past 453 [the
“Funeral Rule'}. The state exemption
provision in the Funeral Rule (2¢ CFR
453.8) is virtually identical to the Used
Car Rule provision (16 CFR 455.8}.
Therefore, staff recommends that states
that are interested in filing a petition for
statewide exemption from the Used Car
Rule consult the state exemption
guidelines for the Funeral Rule for more
detailed information about § 455.6 of the
Rule. These geidelines ( at 50
FR 12521 (1985]] provide an analysis o
the procedures and materiale that staff
believes are relevant to an exemption
proceeding.

VIL. Wustsations
When Does the Rule Apply?

Hlustratéon 2 i: Yo are opening your
fisst dealership, and on your firet dey of
business, you offer ta sell five used
vehicles to comaumers. in the past
twelve months, you have got affered to
sell any other weed vehicles to
consumers. Are yea covered by the
Rule?

No. You aze riot a “dealer,” because
you have not offered to sell at least six
used vehicle is a twelve month period.

- However, ag saan as you offer your

sixth used vebicle for sale te comauiners
within a twelve month period you
become a "dealer," as defined in the
Rule, and therefore must prepare and
display @ Buyers Guide on all esed
vehicles that you offer for sale to ,
consumers, Section 455. 1fd}t3}.

Jltastration 2.2: You are en individual
who occasionalty buys used cara,
repairs then, and then offers them for
sate to the public. In the past twelve
months, you have offered five used cars
for sate. You now are offering to selt
your orth used car to the public. Are
you covered by the Rule?

Yea. Ever if you are not considered 4
“dealer” under etete law, the Rule
defines you asa “dealer.” Because you
are offering te sell your sixth used
vehicle toe consumers within twelve
months, you must comply with all
aspects of the Rule, including preparing

and displaying a Buyera Guide on that
vehicle, Section 455.1{d)(3}.

Iflustration 2.3: You araa depict
offering to eell a parilcular used vehicle
only to dealers. You do not offar to cell
the vehicle to consumers. Must you -
comply with the Rule in this instance?

No. Because pou are not offering to
sell the vehicle to consumers the Rule
does not appty. Section 455.2{a}.

IHustration 2.4: Same as in 2,8 above,
but it is your company’s policy te offer a
vehicle for sale te consumers for only 30
days, and then if the vehicle is unsold. it
would be gold to a dealer at wholesale.
Must you comply with the Rule during
the 30 days that the vehicle is offered for
sale to consumers?

Yes. Wheaever you offer to sell a uzed
vehicle to a consumer, you must comply
with the Rule by preparing end pasting &
Buyers Guide before offering the vehicle
for sale. In this example, you would be
required tc prepare and display a
Buyers Guide while the used vehicle is
being offered for sale to consumers.
However, the Rule does not apply when
you conduct a wholesale transaction,
even if the vehicle was first offered for
sale to consumers. Section 455.2{).

Jilustration 2.5: You ase a dealer who
regularly offera both new and used
vebicles to the general public. You
cusrently have four "demonstrates"
vehicles in aervioe. Are the
demonstrators covesed by the Riske?

Yes. Under the Rule demonstrator
vehicles are inckaded writhin the
definition of “used velictes.”?
Therefore, befare you show 2
deronstrator vehicle to @ consumer, you
must post a properly completed Buyers
Guide on that velticle. Demonstrators
that are ted from other vehicles
being offered for sale need not have
Buyere Guides displayed at all times.
However, as a practical matter. you may
wish to post Buyers Guides an ab
demonstrators whenever they are en
your lot so that you can enawre your
compliance with the Rule. On
demonstrators that have aever been
titled to a consumer, both the Buyers
Guide and the new vehicle disclosure
sticker (the "Mansoney Stickes""} muss
be posted.'* Section 455.1(d}{2}.

'? See supra nate § fur & discyasion of the tsi
“demoavtrates.”

+4 The Automohile Infasmation Discleien Act
{commealy known. es the Menroney Act] can be
found at 15 U.S.C. 1291-23. See ales the
Commission's Statement of Basis and Puryoss for
the Used Ger Rute, ¢¢2R of Oke n. 235
(recognizing that would have tediaplay
both the Manraney Sticker amd the PIC Buyers:
Guide on some vehictes.


NY

= eee

Tuesday
May 17, 1988

Part IX

Federal Trade ©
Commission.

16. CFR Part 455

Trade Regulation Rule; Sale of Used
Motor Vehicles; Analysis of Public
Comments. and Final Staff Compliance
Guidelines



oo

Nina

Federal Register / Vol. 53, No. 95 / Tuesday, May 17, 1988 / Rules and Regulations 17689
ee eee ed

_ BUYERS GUIDE

IMPORTANT: Spoken promises are difficult to enforce. Ask the dealer to put all promises In writing. Keep this form.

VEHICLE MAKE MODEL, YEAR ‘VIN NUMBER

DEALER STOCK NUMBER (Optional)

WARRANTIES FOR THIS VEHICLE:

IMPLIED WARRANTIES ONLY

This means that the dealer does not make any specific promises to fix things that need repair when you buy
the vehicle or after the time of sale. But, state law “implied warranties” may give you some rights to have the
dealer take care of serlous problems that were not apparent when you bought the vehicle.

[_] WARRANTY

C) Fute C LIMITED WARRANTY. The dealer will pay ___% of the labor and__% of the parts for
the covered systems that fail during the warranty period. Ask the dealer for a copy of the war-
ranty document for a full explanation of warranty coverage, exclusions, and the dealer's repalr
obligations. Under state law, ‘implied warranties” may give you even more rights.

SYSTEMS COVERED: DURATION:

G SERVICE CONTRACT. A service contract Is available at an extra charge on this vehicle. Ask for detalls as to
coverage, deductible, price, and exclusions. If you buy a service contract within 90 days of the time of sale, state
law “implied warranties” may give you additional rights.

PRE PUFICHASE INSPECTION: ASK THE DEALER IF YOU MAY HAVE THIS VEHICLE INSPECTED BY YOUR
MECHANIC EITHER ON OR OFF THE LOT.

SEE THE BACK OF THIS FORM for Important additional information, Including a list of some major defects that
may occur In used motor vehicles.


Federal Register / Vol. 53, No. 95 / Tuesday, May 17, 1988 / Rules and Regulations ©

side of the Buyers Guide, write in the .
“systems covered” section that the
warranty covers: “All systems shown on
the reverse side of the Buyers Guide.” If
you choose to use this sentence, you
must specifically list in the “systems
covered” section any systems not
covered. For example, if your warranty
covers all systems shown on the reverse
of the Buyers Guide, except for the fuel
system, write: "All systems shown on
the reverse side of the Buyers Guide,
except the fuel system.” °

You may not use shorthand terms,
such as “power train” or “drive train" to
describe the systems covered by a
warranty. These requirements are
designed so that both you and the
consumer will understand exactly what
is covered by the warranty. This avoids
misunderstandings and potential
disputes that might otherwise occur.
Section 455.2(a)(2}(ii).

Jilustration 3.6: You offer a warranty
that covers 100% of labor and parts, but
with a $50 deductible over the course of
the warranty. Should you fill in "100%"
on the Buyers Guide in the lines for
percentage of repair cost covered under
the warranty?

Yes. Fill in “100%*" in the lines for
percentage of parts and labor, and
include a note to explain the deductible
on the first line of the “systems covered/
duration” portion of the Buyers Guide.
Fur example, on the first line of the
‘aystems covered/duration” portion,
write: “*—A one-time $50 deductible
will apply on repairs." See Appendix E
for an example of a completed Buyers
Guide with this language. Section
455.2(a)(2)(iv).

Mlustration 3.7: You are a dealer who
is offering a used car for sale “as is" ina
state that permits such sales. The Buyers
Guide displayed on the vehicle indicates
that the car is offered “as is." However,
after negotiating with the buyer, you
agree to warrant the vehicle's engine for
90 days or 3,000 miles, whichever comes
first, and to pay 75% of the cost of parts
and labor involved in necessary repairs
during the warranty period. Do you have
tc change the Buyers Guide before you
give it to the buyer?

Yes, Before you give the buyer a copy
of the Buyers Guide, you must change it
to indicate the warranty you have
agreed to provide. In the alternative, you
may simply fill out a new Buyers Guide
with the new information. If, however,
you choose to change the “old” Buyers
Guide, first cross out the “As Is—No
Warranty” box. Next, fill in the
warranty portion of the Buyers Guide
just as you would if you were originally
offering the car with that warranty.
Remember that the final warranty terms
must be included in the sales contract
for the car. An example of the front of a
Buyers Guide like the one ‘described in
this illustration is included as Appendix
D to these guidelines. Sections
455.2(a)(2)(v) (paras. 2~3), and 455.4.

Jilustration 3.8: Same as above, but
instead you originally offered the car
with a warranty. Now you want to sell it
with implied warranties only. Do you
have to change the Buyers Guide before
you offer the vehicle with implied
warranties only? .

Yes. You should cross out the
warranty portion of the Buyers Guide
and mark the box for the “Implied
Warranties Only” disclosure.
Alternatively, you could prepare a new
Buyers Guide, and just mark the box
next to the “Implied Warranties Only”
disclosure. Sections 455.2(a)(1)(ii),
455.2(a)(2)(v) (paras. 2-3), and 455.4,

Justration 3.9: Your dealership has a
used vehicle that is still being prepared
for sale. A consumer is interested in
looking at that vehicle, with the
understanding that it cannot be
delivered until the preparations are
complete. Does the vehicle need to have
a Buyers Guide?

Yes. Before you offer to sell, show, or
actually sell any used vehicle toa
consumer, you must prepare and display
a Buyers Guide in the side window of ©
that vehicle. Therefore, you may want to
prepare and display a Buyers Guide
soon after you acquire the vehicle.
Section 455.2(a).

Illustration 3,10: You are a dealer who
makes a substantial number, but not a
majority, of your sales to Spanish
speaking customers. Your staff is trained

17667

to conduct sales in both Spanish and
English. Should you display both a
Spanish and English version of the
Buyers Guide on all your vehicles?

Yes. To ensure your compliance with
the Rule, it is a good idea to post both
versions of the Buyers Guide if you
expect that a sale could be conducted in
either Spanish or English. A Spanish
language Buyers Guide must be posted .
on a used vehicle before you begin to
discuss, in Spanish, that vehicle with a
customer. Therefore, as 4 practical way
to ensure compliance, you should post
both English and Spanish Buyers Guides
if you make a large number of sales in
both languages, Sections 455.2, 455.5.

Sales Contract and Warranty
Disclosures

dlustration 4.1: When you sell a
vehicle, you complete a customer order,
or bill of sale, and, if the consumer
finances the vehicle, a financing
document prepared by a bank. Do both
of these documents have to contain the
contract disclosure required by
§ 455.3(b) of the Rule?

No. The disclosure is required only on
the “contract of sale.” The contract of
sale is the document by which you agree
to transfer title to the vehicle upon
payment of the purchase price. The
“financing agreement” must contain this -
disclosure if the document contains @
clause stating that the financing
document represents the complete and
total agreement between the dealer and
the consumer, or if the financing
agreement is the only document given to
the consumer to record the transaction.

List of Subjects in 16 CFR Part 455

Used care, Trade practices.

By direction of the Commission.
Emily Rock,
Secretary.

Editorial note—This form, which appears
in the Code of Federal Regulations in 16 CFR

Part 455, is republished for the convenience
of the reader.

BILLING CODE §760-01-m4


17664

Federal Register / Vol. 53, No. 95 / Tuesday, May 17, 1988 / Rules and Regulations

Remember: When a dealer enters into
8 service contract with a consumer
“= within 90 days of selling the vehicle,
) federal law prohibits the dealer from
/ disclaiming implied warranties-on the
“~_ evetems covered in that service contract.
For example, if you are a dealer who
sells a car “as is," the car normally will
wwe ve Govered by uupued wattanties
{assuming that state law permits “as is”
sales). But if you also enter into a
service contract covering the engine for
six months, you automatically provide
an implied warranty on the engine.

If you are in a state that regulates
service contracts as the “business of
insurance," you need not include the
service contract disclosure on your
Buyers Guides. Section 455.2(b)(3). In
those states, you have the option to
check the box next to the service
contract disclosure, cross out the service
contract disclosure, delete it from the
Buyers Guide, or do nothing to change
the pre-printed Buyers Guide that you
have obtained.

5. Dealer Identification and Consumer
Complaint Information

Put the name and address of your
dealership in the space provided on the
back of the Buyers Guide. If you do not
have a dealership, use the name and

“~s, address of your place of business (for
Jexample, your service station) or your

_/ own name and home address, Section
455.2(c).

In the space provided below the
dealer's name and address, you must
put the name and telephone number of
the person to contact if the buyer has a
complaint. You might want to include
the position of the person to be
contacted, along with their name, so that
consumers will know who to contact if
the individual named has left the
dealership. Section 455.2(e),

C. Spanish Language Sales—Section
455.5

Section 455.5 of the Rule sets forth a
Buyers Guide in Spanish that must be
used by a dealer who conducts a sale in
Spanish. From a practical standpoint,
dealers must post both the English and
Spanish versions of the Buyers Guide
where a substantial number of sales are
made in both languages. See Illustration
3.10 for a further discussion of this
provision of the Rule.

D. How to Display the Buyers Guide

The Buyers Guide must be displayed
in a side window of the vehicle so that
the front side (with the title "Buyers
—_ ene faces the outside. You may
display copies of both the front and
back of the Buyers Guide so that both

sides can be read from outside. Section
455.2(a)(1).

The Buyers Guide should be firmly
affixed to the inside of the side window.
This may be accomplished using any
method you select, such as tape, light
glue, etc. If desired, you may display the
Buyers Guide inside a clear plastic
sleeve which iivids the Buyers Guide
against the inside of the side window. If
necessary, the form may be removed
from the window temporarily during a
teat drive, but you must return it to the
window as soon as the test drive is over.

£. Changes in Warranty Coverage

If you and the buyer agree to any
changes in the warranty that was
described on the Buyers Guide, you
must write those changes onto the
Buyers Guide. Section 455.2(b)(2)(v)
(paras. 2-3). If, for instance, the car was
originally offered with a warranty, but
following negotiations it was actually
sold without a warranty, cross out the
offered warranty and mark the “As Ise—
No Warranty” or “Implied Warranties
Only" box, as appropriate. If you first
offer the vehicle for sale “as is" (or with
only implied warranties), but then sell it
with a warranty, simply crosa out the
box for the “As Is—No Warranty"
Disclosure (or the “Implied Warranties
Only" disclosure) and fill in the
warranty terms. In these cases, be sure
that the Buyers Guide that you give to
the buyer accurately reflects the final
warranty terms. Appendix D and
Illustrations 3.7 and 3.8 further explain
this provision of the Rule.

In addition to noting any agreed-vpon
changes in warranty coverage on the
Buyers Guide, you must remember to
include the final warranty terms in your
sales contract or separate warranty
document. Section 455.4. Your contract
with the consumer may include several
documents. It might include a “sales
contract” as well as a separate warrenty
document that gives detailed warranty
information. Whether you make
warranty disclosures in the sales
contract or in a separate warranty
document, you must remember to make
any necessary changes to the warranty
information to reflect the final warranty
terms after negotiations with the
customer. Sales contract and warranty
disclosures are discussed in more detail
in the next section.

TV. Sales Contract and Warranty
Disclosures

A. The Used Car Rule's Requirements

Pursuant to § 455.3(b) of the Rule,
information on the Buyers Guide will
override-any contrary provisions that
there may be in the sales contract. To

inform consumers of this provision of
the Used Car Rule, you must place the
disclosure that follows in the sales
contract in a conspicuous manner:

The information you see on the window
form for thie vehicle is part of this contract.
Information on the window form overrides

any contrary provisions in the contract of
sale#

See Illustration 4.1 for a discussion of
whether a financing document must
contain the disclosure.

B. The Warranty Disclosure Rule's
Requirements

If you offer a warranty, you must
comply with the Federal Trade
Commission's Warranty Disclosure
Rule, 16 CFR Part 701. The disclosures
required by this Rule may be placed in
the “sales contract” or in a separate
warranty document, but they must all
appear together in the same document.
Specifically, in simple and readily
understood language, your warranty
document must:

(1) State whether the warranty offered
is “full” or “limited.”

(2) Indicate the percentage of the
repair costs that you will pay.

(3) List the specific systema that are
covered by the warrenty.

(4) List any parts or systems that aré
excluded from coverage under the
warranty, if it is necessary for
clarification. For example, “battery not
covered.”

(5) Indicate the duration of warranty
coverage for each of the covered
systems.

(6) Explain how a customer gets
warranty service. Include your
company’s name, address, and the
telephone number of the person to cull
concerning warranty service.

(7) Include the following disclosure:
“This warranty gives you specific legal
Tights, and you may also have other
rights which vary from state to state.”

(8) Disclose all obligations that the
consumer has, if any, as a condition to
obtaining warranty service,

(9) Include the following disclosure
only if you wish to limit the duration of
implied warranties: "Some states do not
allow limitations on how long an
implied warranty lasts, so the above
limitation may not apply to you.”

(10) Include the following disclosure
only if you wish to exclude or limit
consequential or incidental damages:

** 16 CFR 455.3(b). The Spanish translation of this
disclosure is: La informacion que aparece en la
ventanilla de este vehiculo forma parte de este
contrato. La informacion contenida en el formulario
de la ventanilla anula cualquier prevision que
eatabiezce lo contrerin y que aparezca en el
contrato de venta.



ao,
4

4

Lo

17660

Federal Register / Vol. 53, No. 95 / Tuesday, May 17, 1988'/ Rules and Regulations

—

Second, staff revised its guidance compliance with the trade regulation
concerning sales at auctions to make the rule.

guidelines consistent with the EFFECTIVE DATE: May 17, 1988.
Commission's ruling in the proceeding
FOR FURTHER INFORMATION CONTACT:

enyii tia mb
denying exemptions to a number of Joyce E. Plyler (202/328-3021) or

automobile leasing companies.* The
idelii i tated t t Matthew D. Gold (202/326-3019),
guidelines previously stated that sales a Attorneys, Division of Enforcement,

“ctions are covered by the Rule if the Bureau of Consumer Protection, Federal

auctions are open to consumers and ul 6
advertised to consumers. The revised ‘Trade Commission, Washington, DC

guidelines eliminate advertising as a 20580.

condition to coverage of the Rule in SUPPLEMENTARY INFORMATION:
auction settings and state that sales to _—
consumers at any auctions that are open _Stalf Compliance Guidelines Outline

1. Introduction
Ul, What Transactions Does the Rule Cover?
A. “Vehicle” Defined—Section 455.1(d)(1)
B. “Used Vehicle" Defined—Section
456.1(d)(2)
C. “Dealer” Defined—Section 455.1(d)(3)
D. "Consumer" Defined—Section

to consumers are covered by the Rule.
Finally, the staff made a number of
nonsubstantive editorial changes. For
example, all of the illustrations are now
placed at the end of the text to make
them easier to find within the document.

C. Conclusion 455.1(d}{4)
In this notice, staff has analyzed E Consignment Sales
F. Auctions

comments on its initial compliance
guidelines for the Used Car Rule and has
noted a number of areas in which it
agrees that changes in the guidelines are
warranted. Final staff compliance
guidelines for the Used Car Rule
incorporating these changes are
published in a separate notice in the
Federal Register,

G. Where Does the Rule Apply?
II. The Buyers Guide
A. General Information
B. Preparing the Buyers Guide
1. Buyers Guide Format—Section 455.2(a)
2. Vehicle Information—Section 455.2(d)
3, Warranty Information—Section
455.2(b)
a. "As ls—No Warranty" Version
b. "Implied Warranties Only” Version
c. Filling in the Warranty Portion of the
Buyers Guide
d. Unexpired Manufacturer's
Warranties
e, Mandatory Werranties .
4. Service Contract Availability
5. Dealer Identification and Consumer
Complaint Information
C. Spanish Language Sales—Section 455.5
D. How to Display the Buyers Guide
E. Changes in Warranty Coverage
TV: Sales Contract and Warranty Disclosures
A. The Used Car Rule's Requirements
B. The Warranty Disclosure Rule's
Requirements
V. Contrary Statements—Section 455.4
VI. State Exemption Petitions—Section 455.6.
VII. Illustrations

I. Introduction

These staff compliance guidelines
describe certain. provisions of the
Federal Trade Commission's Trade
Regulation Rule Concerning the Sale of
Used Motor Vehicles (the “Rule” or
“Used Car Rule"), 16 CER Part 455,
which was promulgated on November
19,.1984.! The Used: Car Rule became
effective on May 9, 1985. Violations of

List of Subjects in 16 CFR Part 455
Used cars, Trade practices.
By direction of the Commission.
Emily Rock,
Secretury.
[FR Doc. 88-11012 Filed 5-16-88; 8:45 am}
BILLING CODE 6750-01-M

16 CFR Part 455

Trade Regulation Rute; Sale of Used
Motor Vehicles.

AGENCY: Federal Trade Commission.

ACTION: Final Staff compliance
guidelines.

sumMany: The staff of the Federal Trade
Commission publishes its staff
compliance guidelines for the Used Car
Rule to provide assistance to industry
members, The views expressed in the
guidelines are those of the staff only.
They have not been approved or
adopted by the Commission and are net
binding on the Commission. However,
the guidelines will serve as enforcement
criteria for the staff in assessing

48 FR 45602 (1964), That notice included the
Used Car Rule and the Commission's Statement of
Basis and Purpose concerning the Rule.

* Id. But see Section i(G). infra, concerning the
application of the Rule within the State of
Wisconsin.

° Stuff made-public its enforcement polloy
regarding consumer sales at auctions in a staff
pinion lefter to each pf the leasing companies who
hutl pelitiuned for exemption from the Rule.

the Rule can result in the imposition of
civil penalties of up to $10,000 per
violation.>

These final guidelines are a
modification of the guidelines published
in the Federal Register on May 18, 1987.
Some of the changes were based on
several comments that were received.
An analysis of those comments is
included in a separate notice in the
Federal Register.

The guidelines neither amend nor
modify the Rule. Staff is publishing
these guidelines to provide assistance to
indtstry members in understanding the
Rule and complying with its obligations.
In addition, staff has prepared a
brochure entitled'“Facts For Business:
[A] Dealer's Guide to the FTC Used Car
Rule,” designed to assist dealers in
understanding the Rule. Staff mailed a
copy of this brochure to more than
89,000 dealers before the Rule took
effect. If you are a new dealer, did not
receive this brochure, or need another
copy, you may request a free copy by
writing to the Publications Branch,
Federal Trade Commission,
Washington, DC 20580. You also may
request a free copy of these compliance
guidelines.

The views expressed in these
guidelines are those of staff only. These
views have not been approved or
adopted by the Commission and they
are not binding on the Commission.
However, the guidelines will serve as
enforcement criteria for staff in
assessing compliance with the Used Car
Rule.

The Used Car Rule is primarily
interded to prevent oral
misrepresentations and unfair omissions
of material facts by used car dealers
concerning warranty coverage. The Rule
requires clear disclosure through a
window sticker. called the “Buyers
Guide,” of any warranty coverage and
the terms and conditions of any dealer-
offered warranty, including the duration
of warranty coverage and the
percentage of total repair costs that the
dealer will pay. The Rule also requires
certain additional disclosures on the
Buyers Guide, including: a suggestion
that consumers ask the dealer if a pre-
purchase inspection is permitted; a
warning against reliance on spoken
promises that are not confirmed in
writing; and a list of the fourteen major
systems of an automobile and defects
that can occur in these systems.

In addition, the Rule provides that the
Buyers Guide disclosures are
incorporated into the sales contract.
Dealers are required to place a specific,

215 U.S.C. 45/mil {A}


17672 Federal Registe: / Vol. 53, No. 95 / Tuesday, May 17, 1988 / Rules and Regulations
re — ——

<r

Below is a list of some major defects that may occur In used motor vehicles. -

Frame & Body
Frame-cracks, corrective welds, or rusted through
Dogtracks—bent or twisted frame

Engine
Oil leakage, excluding normal seepage
Cracked block or head
Belts missing or inoperable
Knocks or misses related to camshaft lifters and
push rods,
‘Abnormal exhaust discharge

‘Tranamission & Drive Shaft .
Improper fluid level or leakage, excluding normal

seepage

Cracked or damaged case which is visible

Abnormal noise or vibration caused by faulty
transmission or drive shaft

Improper shifting or functioning in any gear

Manual clutch slips of chatters

Differential
Improper fiuid level or leakage excluding normal

seepage
Cracked or damaged housing which Is visible
‘Abnormal noise or vibration caused by faulty
differential

Cooling System
Leakage including radiator
improperty functioning water pump

Electrical System
Battery leakage
Improperly functioning alternator, generator,

battery, or staner

Fuel System
Visible leakage

Inoperable Accessories
‘Gauges or warning devices
Air conditioner
Heater & Defroster

Steering System
‘Too much free play at steering wheel
Free play in linkage more than ‘an ee

‘Suspension System
Ball joint seals damaged
Structural parts bent or damaged
Stabilizer bar disconnected
Spring broken
Shock absorber mounting loose :
Rubber bushings damaged or missing
Radius rod damaged or missing
‘Shock absorber leaking or functioning Improperty

Tires
‘Tread depth less than 2/32 inch
Sizes mismatched
Visible damage

Wheels
Visible cracks, damage or repairs
Mounting bolts loose or missing

Exhaust System
Leakage

XYZ Auto Sales, Inc.

‘OLALEA

123 Main Street
ADCAESS

Anytown, U.S.A. 01234

Ms. Smith, Used Car Sales Manager (123) 456-7890
‘BEE FOR COMPLAINTS:

IMPORTANT: The information on this form Is part of any contract to buy this vehicle. Removal of this tabel before

\ consumer purchase (except for purpose of test-driving) is a violation of federal law (16 C.F.R. 455).

7


17674 Federal Register / Vol. 53, No. 95 / Tuesday, May 17, 1988 / Rules and Regulations

Below Is a list of some major defects that may occur In used motor vehicles.

Frame & Body
Frame-cracks, corrective welds, or rusted through
Dogtracks—bemt or twisted frame

Engine
Co low ng®, Oxcludirg surmal seepage
Cracked block or head
Belts missing of inoperable
Knocks or misses related to camshaft lifters and
push rods
‘Abnormal exhaust discharge

‘Tranamission & Drive Shaft

Improper fluid level or leakage, excluding normal
seepage

Cracked or damaged case which Is visible

‘Abnormal noise of vibration caused by faulty
transmission or drive shaft

Improper shifting or functioning In any gear

Manual clutch slips or chatters

Differential
Improper tluid level or leakage excluding normal
seepage
Cracked or damaged housing which Is visible
Abnormal noise or vibration caused by faulty
differential

Cooling System
Leakage including radiator
Improperly functioning water pump

Electrical System
Battery leakage
Improperly functioning alternator, generator,
battery, or starter

Fuel System
Visible leakage

Inoperable Accessories
Gauges or warning devices
Air conditioner
Heater & Defroster

Brake System

Fallure warning light broken

Pedal not firm under pressure (DOT spec.)

Not enough pedal reserve (DOT spec.)

Does not stop vehicle In straight line (DOT spec.)
Hoses damaged

Drum or rotor too thin (Migr. Specs)

Lining or pad thickness less than 1/32 inch
Power unit not operating or teaking

‘Structural or mechanical parts damaged -

Steering System
‘Yoo much free play at steering whee! (DOT specs.)
Free play in linkage more than 1/4 inch
Steering gear binds or jams
Front wheels aligned improperly (DOT specs.)
Power unit belts cracked or slipping
Power unit fluid level improper

Suspension System
Ball joint seals damaged
‘Structural parts bent or damaged
Stabilizer bar disconnected
Spring broken
Shock absorber mounting loose
Rubber bushings damaged or missing
Radius rod damaged or mi
Shock absorber leaking or functioning improperty

Tires
‘Tread depth less than 2/32 inch
Sizes mismatched
Visible damage

Wheels
Visible cracks, damage or repairs
‘Mounting bolts loose or missing

Exhaust System
Leakage

XYZ Auto Sales, Inc.

123 Main Street

ADORESS

Anytown, U.S.A. 01234

Ms. Smith, Used Car Sales Manager

(123) 456-7890

SEE FOR COMPLAINTS:

IMPORTANT: The information on this form Is part of any contract to buy this vehicle. Removal of this label before
consumer purchase (except for purpose of test-driving) Is a violation of federal law (16 C.F.R. 455).


7,

However, the Rule excludes only
certain sales by /essors. It does not
exclude /essees if the lessee offers for
sale more than five vehicles within
twelve months and therefore is a
“dealer” as defined by the Rule. Thus,
lessees offering for sale six or more
vehicles wihin a year are responsible for
complying with the Rule.

Staff has modified the guidelines to
state that lessors are not required to
comply with the Rule for sales to buyers
procured by lessees, regardless of how
the buyer is procured. Staff also has
added a guideline stating that lessees
will be required to comply with the Rule
if they offer for sale, to persons other
than their employees or dealers, six or
more used vehicles within a year.

3. Disclosure of Mandatory Warranties

NIADA took exception to staff's
advice that the Rule requires dealers to
disclose on the Buyers Guide any
warranty that they must provide as
mandated by state or local law. NIADA
analogized mandatory warranties to
unexpired manufacturers’ warranties
because neither is a type of warranty
provided voluntarily by the dealer and
subject to negotiation. NIADA argued
that because the disclosure of unexpired
manufacturers’ warranties is optional
under the Rule, then the Rule must have
meant to make disclosure of mandatory
warranties optional as well.

Staff rejects NIADA‘s analysis
because it draws an inapt parallel
between dealer warranties mandated by
law and unexpired manufacturers’
warranties. The distinction between the
two types of warranties is that the
former must be honored by the dealer
while the latter is the responsibility of
the manufacturer. Section 455.2(b)(2) of
the Rule states: “If you [the dealer] offer
the vehicle with a warranty, briefly
describe the warranty terme in the space
provided.” Although a dealer may be
required by law to provide a warranty,
such a mandatory warranty is
nevertheless a dealer-offered warranty
that must be disclosed.® Disclosure of
warranties that a dealer must provide,
as required by the Rule, is important to
ensure that consumers are aware of
their potential rights to have repairs
made by the dealer. Therefore, staff has
not changed its guidance that warranties
mandated by law must be disclosed on
the Buyers Guide.

4. Service Contracts

NADA requested that one minor word
change be made in staff's explanation
regarding the disclaimer of implied
warranties when service contracts are

* See id. at 45710.

sold. NADA suggested that staff
substitute the words “enter into” for the
word “sell” to make clear that implied
warranty obligations attach only when a
dealer enters into a service contract, i.e.,
when the contract obligates the dealer,
rather than a third party, to perform
services under the contract. If the dealer
sells a third party service contract, the
dealer may disclaim implied warranties
in states allowing such disclaimers.

Although staff did not intend the word
“sell” to include the sale of a third party
contract, staff has substituted “enter
into” for “sell” in order to make
absolutely clear that only when a dealer
“enters into" a service contract for any
period of time within 90 days of sale
may the dealer not disclaim implied
warranties. The only sentence affected
by this change now reads, “if you also
enter into a service contract covering
the engine for six months, you
automatically provide an implied
warranty on the engine.”

5. Sales Contract Disclosures

NADA questioned staff's guidance
that final warranty terms must be
identified in the contract of sale, arguing
that it is unnecessary to include such
terms in the sales contract since they
must appear in a warranty document.
The original guidelines stated: “You
must include warranty information in
the sales contract. (The warranty
information may be printed in your sales
contract, or it may be on a separate
warranty page that is referred to and
made part of your sales contract)”
{emphasis in original).

Staff revised the guidelines to clarify
that although final warranty terms must
appear in one single document that is
part of the contract with the consumer,
they are not required to be placed in a
document titled, “sales contract,” or
incorporated by reference into it. The
contract with the consumer may include
several documents, only one of which
must include all of the warranty
disclosures required by the Warranty
Disclosure Rule.* However, neither the
Used Car Rule nor the Warranty
Disclosure Rule requires that warranty
terms be referenced to or repeated in the
“sales contract.” In addition to revising
the main text, staff deleted Illustration
4.2 to eliminate confusion on this issue.

These revisions merely clarify that
warranty terms need not be placed in
the sales contract as long as they appear
in a separate document. Of course, the
disclosure-regarding incorporation of the
Buyers Guide into the contract must be
placed conspicuously in the sales

* 16 CFR Part 701 (1975).

contract as required by § 455.3(b) of the
Rule.

6, Financing Agreements

First Virginia Banks, Inc., NADA, and
NIADA each commented that a
“financing agreement” should not be
required to include the foreclosure
concerning incorporation of the Buyers
Guide into the sales contract, contained
in § 455.3(b) of the Rule.” The original
guidelines had advised dealers that the
financing agreement might have to
include the incorporation disclosure if
the financing agreement contained terms
apart from those governing the financing
of the transaction.

Staff agrees with the commenters that
this guideline-should be revised to state
that a financing document must contain
the § 455.3(b) disclosure only if the
financing document ia the only
document used to record the transaction
or if the document contains a clause
stating that it is the complete and total
agreement between the dealer and the
consumer. Illustration 4.1 was revised to
make this point.

B. Other Revisions

Staff made two substantive changes
that were unrelated to the comments.
First, staff modified slightly its .
explanation of the Rule's exclusion of
banks and financial institutions. Section
455.1(d)(3) states that the definition of
dealer “does not include a bank or
financial institution * * *." The
guidelines explain that the “definition of
‘dealer’ specifically excludes banks and
financial institutions selling used
vehicles forfeited as collateral on
consumer loans.” Staff has revised the
guidelines to delete the phrase “forfeited
as collateral on consumer loans.”

Although the SBP specifically
identified the sale of cars forfeited as
collateral as a type of sale by banks that
would be excluded from coverage,® this
was only an illustration of one
transaction that is excluded. The Rule
itself unequivocally excludes banks and
financial institutions. Deletion of the
phrase “forfeited as collateral en
consumer loans” will eliminate the
incorrect implication that a bank's sale
of used vehicles other than those
forfeited as collateral would be covered
by the Rule.

‘NADA ‘was apparently under the mistaken
impression that the guidelines indicated that
warranty terme must sometimes appear ina
financing agreement. Illustration 4.1, which is the
relevant section, applied only to the question of
whether the § 455.3(b) disclosure should appeer in
the financing agreement.

949 FR st 45708.



17658 Federal Register / Vol. 53, No. 95 / Tuesday, May 17, 1988 / Rules and Regulations
=e eee
FEDERAL TRADE COMMISSION action, the staff has made both September, 1987.2 NADA commented
. substantive and editorial revisions. during that proceeding that sales by any
16 CFR Part 455 dealer, not just a lessor, at auctions,

Trade Regulation Rule; Sale of Used

.___/ Motor Vehicies

NS

*7ency: Federal Trede Commission.

AcTION: Analysis of public comments on
staff compliance guidelines.

SUMMARY: The staff of the Federal Trade
Commission publishes its analysis of the
public comments received in response to
its request for comment on the staff
compliance guidelines for the Used Car
Rule. This notice summarizes and
analyzes the issues raised by the
commenters and notes those parts of the
guidelines that have been modified in
response to the comments. The revised
compliance guidelines are published in a
separate notice in the Federal Register.
FOR FURTHER INFORMATION CONTACT:
Joyce E. Plyler (202-326-3021) or
Matthew D. Gold (202-326-3019),
Attorneys, Division of Enforcement,
Bureau of Consumer Protection, Federal
Trade Commission, Washington, DC
20580.
‘SUPPLEMENTARY INFORMATION: The
Division of Enforcement staff published
compliance guidelines for the Used Car
Rule in the Federal Register on May 18,
1987. The guidelines are meant to
‘provide guidance concerning how the
Rule applies in specific situations. They
are the opinion of staff only and have
not been adopted by the Commission
and are not binding on the Commission.
However, the guidelines serve as criteria
for the staff in assessing compliance
with the Used Car Rule.

Five comments were received during
the 30-day comment period after
publication of the guidelines. Three
comments were submitted by trade
associations—the National Automobile
Dealers Association ("NADA"), the
National Independent Automobile
Dealers Association ("NIADA"), and the
National Vehicle Leasing Association
("NVLA”). One bank holding company,
First Virginia Banks, Inc., also
commented. The fifth comment, from a
consumer, did not make specific
substantive comments about the
guidelines and is not discussed here.
‘The comments raised six substantive
issues, which are discussed separately
below, in the order of their appearance
in the guidelines.

Based on its analysis of the
comments, further review of the
guidelines, and subsequent Commission

oo

|} "The comments were placed on the public record

—n FTC File 215-54 and are labelled 106-1 through
108-5.

A. Public Comments
4, Demonstrators

NADA objected to staff's
interpretation that all demonstrators,
including those still in service as
demonstrators, must have a Buyers
Guide posted on them before being
shown to a consumer. In its comment,
NADA distinguished between
demonstrators that are “offered for sale”
and those that are “available for sale.”

Although NADA agreed that
demonstrators are “used” vehicles, it
contended that demonstrators are not
“offered for sale” until they are taken
out of demonstrator service and put on
the car lot. While acknowledging that
demonstratora are always “available”
for sale, NADA argued that a
salesperson who merely responds to a
customer's questions about a
demonstrator does not offer that vehicle
for sale. NADA proposed that the
guidelines instruct dealers that they
must post Buyers Guides on
demonstrator vehicles only after the
demonstrators have been removed from
service.

Staff rejects NADA's interpretation.
We disagree that in used car sales there
is a meaningful distinction between
“offering” a vehicle for sale and making
it “available” for sale. In staff's view,
when a salesperson discusses a vehicle
that is available for sale with a
customer, and is willing to sell the
vehicle, then that vehicle is “offered” for
sale.

The guidelines have not been
substantively revised on this issue, but
the illustrations concerning
demonstrators have been clarified.
Illustration 2.6 has been modified to
apply to situations in which
demonstrators are still in service so that
dealers will be guided on that specific
issue. Hlustration 2.7 in the former
guidelines was deleted because staff
agrees with NADA‘s suggestion that the

illustration would not apply in the "real *

world” and therefore is not helpful to
dealers. Dealers do not impose time or
mileage restrictions within which
demonstrators are not available for sale,
as suggested in the former illustration.

2. Lessor/Lessee Sales

All three trade associations
commented about sales of leased
vehicles. NADA resubmitted the
comments it made in the leasing
company exemption proceeding, which
was considered by the Commission in

repossession lots, through solicitation
for bids and by consignment should be
exempted from the Rule. The
Commission rejected the petitioners’
and NADA’s request to exempt sales to
consumers through such methods.’
NADA‘s comment on the petitions for
exemption raises no issues that have nat
been previously considered by the
Commission. Staff has revised the
guidelines to make them consistent with
the Commission's decision.

NIADA and NVLA both disagreed
with staff's advice that sales by lessors
to buyers procured by lessees would be
covered by the Rule if the lessees
advertised the vehicles for sale, but
would not be covered if the buyer
approached the lessee about purchasing
the vehicle. Staff's advice was prompted
by its interpretation that the Rule
intended to exclude only sales to buyers
procured by individual lessees for the
vehicles they had personally driven, and
nat to exclude sales when numerous
buyers had been procured by lessees for
vehicles the lessees had never driven, as
in the case of leased fleets.

NIADA contended that the Rule
should apply to all non-lessee or non-
employee sales, regardless of how the
buyers were procured. NVLA argued
that the Rule should not apply to any
sales by lessors to buyers procured by
lessees because the Rule makes no
distinction based on how purchasers are
acquired by lessees.

Upon reconsideration of the-Rule,
staff agrees with NVLA. Section
455.1(d)(3) of the Rule excludes from its
definition of dealer “a lessor selling a
leased vehicle by or to that vehicle's
lessee or to an employee of the lessee.”
(emphasis added). The Statement of
Basis and Purpose (SBP) for the Used
Car Rule, states:

The definition of desler specifically
excludes * * * a lessor selling leased
vehicles to the vehicle's lessee, to a buyer
procured by the vehicle's lessee, or ta the
lessee's employee.*

Neither the Rule nor the SBP
distinguishes between the methoda a
lessee uses to procure a buyer. Thus,
staff deleted its advice that lessors
would have to comply with the Rule for
sales to buyers procured by lessees
through advertising.

* See 82 FR 34760 (1987) (Commission denial of
patitions for exemption).

"id

* Statement of Basis and Purpose for the Used
Car Rule ("SBP"), 49 FR 45892, 45708 (Nov. 19, 1064).



lan

\

{

17670 Federal Register / Vol. 53, No. 95 / Tuesday, May 17, 1988 / Rules and Regulations
— — RN

Below Is a lint of some major defects that may occur In used motor vehicles:

Frame & Body

Frame-cracka, corrective welds, of rusted through

Dogtracks—bentt or twisted frame
rering
Oil leakage, excluding normal seepage
Cracked block or head
Belts missing or inoperable
Knocks or misses related to camshaft lifters and
push rods
‘Abnormal exhaust discharge

Tranamiasion & Drive Shaft

Improper fluid level or leakage, excluding normal
Seepage

Cracked or damaged case which is visible

Abnormal noise or vibration caused by faulty
transmission or drive shaft

Improper shifting or functioning in-any gear

Manual clutch slips or chatters

Differential
Improper fluid level or leakage excluding normal
seepage
Cracked or damaged housing which is visible
Abnormal noise or vibration caused by faulty
differential

Cooling System
Leakage including radiator
Improperly functioning water pump

Electrical Syatem -
Battery leakage
improperly functioning alternator, generator,
battery, or starter

Fuel System
Visible leakage

Inoperable Accessories
Gauges of warning devices
Air conditioner
Heater & Detroster

Failure warming light breken .
Pedal not firm under pressure (DOT spec.)

Not enough pedal reserve (DOT spec.)

Does not stop vehicte in straight tins (DOT spec.)
Hoses damaged

Drum or rotor too thin (Migr. Specs)

Lining or pad thickness less than 1/32 Inch
Power unit not operating of leaking

‘Structural or mechanical parts damaged

Steering System
‘Too much free play at steering whee! (DOT specs.)
Fiae play in linkage more than 14 inch
Steering gear binds or jams
Front wheels aligned improperly (DOT specs.)
Power unit belts cracked or slipping
Power unit fluid level improper

‘Suspension System,
Ball Joint seals damaged
Structural parts bent or damaged
Stabilizer bar disconnected
Spring broken
‘Shock absorber mounting loose
Rubber bushings damaged or missing
Radius rod damaged or missing
Shock absorber leaking or functioning improperty

Tires
Tread depth less than 2/32 inch
Sizes mismatched
Visible damage

Wheals
Visible cracks, damage or repairs
Mounting bolts loose or missing

Exhaust System
Leakage

XYZ Auto Sales, Inc,

OLR
123 Main Street

ADORESS.

Anytown, U.S.A. 01234

Ms. Smith, Used Car Sales Manager

(123) 456-7890

SEE FOR COMPLAINTS

_ IMPORTANT: The Information on this form Is part of any contract to buy this vehicle. Removal of this label before
( ) consumer purchase (except for purpose of test-driving) Is a violation of federal. law (16 C.F.R. 455).

—/


Federal Register / Vol. 53, No. 95 / Tuesday, May 17, 1988 / Rules and Regulations 17673

“sexs BUYERS GUIDE

} IMPORTANT: Spoken promises are difficult to enforce, Ask the dealer to put all promises In writing. Keep this form

VEHICLE MAKE MODEL YEAR VIN NUMBER

DEALER STOCK NUMBER (Optional)

WARRANTIES FOR THIS VEHICLE:

AS IS - NO WARRANTY.

YOU WILL PAY ALL COSTS FOR ANY REPAIRS. The dealer assumes no responsibility for any repairs regardieas
of any oral statements about the vehicle.

| WARRANTY

) O FULL x LIMITED WARRANTY. The dealer will pay /2@ % of the labor and _/02 % of the parts for

—_ the covered systems that fall during the warranty period. Ask the dealer for @ copy of the war-
ranty document for a full explanation of warranty coverage, exclusions, and the lealer's repalr
obligations. Under state law, “Implied warranties” may give you even more rights. .

SYSTEMS COVERED: DURATION:
Engine
Frame & Body J
Transmission )
Drive Shart }
Differential ) 12,000 miles or I7 months arter
Electrical System (except Battery) e, a

MANUFACTURER'S WARRANTY STILL APPLIES. The Tambactirer’s original warranty ————
has not expired on this veniclé,— Consult manufac 7
__ Booklet Tor details a5 tw warranty Coverage, SErvice IOCations; ete;

O SERVICE CONTRACT. A service Contract Is available at an extra charge on this vehicle. Ask for detalls as to
coverage, deductible, price, and exclusions. if you buy a service contract within 90 days of the time of sale, state
law “implied warranties” may give you additional rights.

PRE PURCHASE INSPECTION: ASK THE DEALER IF YOU MAY HAVE THIS VEHICLE INSPECTED BY YOUR
MECHANIC EITHER ON OR OFF THE Lor.

SEE THE BACK OF THIS FORM for Important additional information, Inchiding a fist of some major defects that
~~ may occur In used-motos vehleies. .
}

/