Lemon Law Attorneys Blog

The answer to this question depends on the state in which the defective vehicles are repurchased or resold.  Some states have strict laws governing lemon vehicles, while other states do not have any such laws.

A number of states, including California, require the title of a repurchased vehicle to be branded that it was repurchased due to a manufacturer’s defect. The California Automotive Consumer Notification Act, for instance, requires the title of a repurchased vehicle to be branded that it was repurchased due to a manufacturer’s defect, the provision of a warranty buyback notice to the consumer, and the placement of a decal on the vehicle indicating that it was repurchased because of a manufacturer’s defect.  The warranty buyback notice discloses the defects reported by the original owner or lessee as well as the repairs performed in an effort to correct the problems reported by the original owner or lessee.  Additionally, the warranty buyback notice must be signed by the buyer prior to the sale of a lemon vehicle.   Finally, California requires the manufacturer to fix the defect and give the next buyer a one-year warranty covering that defect. California law, therefore, requires strict disclosure of a lemon vehicle’s problems to subsequent buyers.

However, not all states have such requirements.  In some states, a manufacturer can turn around and sell a lemon vehicle to someone else.  No repairs, branding, or disclosure are required.  Such vehicles quickly end up as someone else’s problem.

Lemon vehicles are commonly transferred to auction houses, which then auction the vehicles to the public or automobile dealers.  However, some automakers take defective vehicles out of the market after repurchasing them, by selling them as scrap metal.

The practice of selling lemon vehicles without disclosing their problems or the fact that they were repurchased is commonly called “lemon laundering.”  A prevalent method of lemon laundering is selling the repurchased vehicles in states that lack title branding requirements. Because there is no national law governing title branding or lemon vehicle disclosures, this type of laundering is easy.