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What do you do when your new car turns out to be a lemon?
Author: 
Philippe Richer
February 18, 2020
Graphic of a man standing in front of a red car

A friend of mine recently purchased a new vehicle. She had to return her new car several times as the starter and battery kept failing (I believe the dealer replaced the battery twice and the starter three times). She started to worry that she had purchased a lemon. Frustrated, she called me to find out about the dealer's legal obligations.

Legal Costs Conundrum

Like most professions, we deal with a defined number of issues regularly. However, now and then, something new arises. When this happens, we have a choice. We can refer the matter to someone who deals specifically with the new issue or spend the time familiarizing ourselves with the problem. If we spend time familiarizing ourselves with a new problem, we normally charge our clients for the research. This reality doesn't occur very often as our clients are better served dealing with a lawyer who is familiar with the issue. But some legal issues, like this car problem, are not "big" enough issues for most lawyers – meaning that legal costs to research outweigh the potential benefit. Few clients happily pay $2,000 in legal fees for a $5,000 repair job. In this case, because my "client" is a friend and, as luck would have it, I recently read an article about the issue, I decided to look into it. Based on my research, I offered her advice and wrote this article about consumer options when buying a problem vehicle, otherwise known as a "lemon."

Lemon Laws in the U.S.

Every state in the U.S. has enacted a "lemon law." While various state laws are somewhat different, in most cases, a manufacturer who sells a lemon must make repairs, replace, or refund a vehicle after a "reasonable" number of repair attempts. Courts can also order manufacturers to pay the legal costs consumers bear when suing under these laws. In Canada, this type of issue falls within provincial jurisdiction, so each province must enact legislation on the issue. Ontario, B.C., Alberta, Nova Scotia, Quebec and Manitoba have enacted legislation on the issue. However, they differ substantially on protections provided to consumers. For example, in Quebec, all vehicles sold are covered under warranty by law. If the vehicle does not measure up to the warranty, the manufacturer must repair at no cost, replace, or refund. The law may also require that the dealer reimburse the consumer if she suffered additional damages due to a defective product. Whereas in Nova Scotia and Manitoba, the laws only compel dealers to disclose the vehicle's history and whether another jurisdiction branded the vehicle as a lemon.

Dealers in Manitoba

More specifically, in Manitoba, as of January 2012, dealers must disclose if the vehicle:

  • is new or used, 
  • if the manufacturer's warranty has been cancelled (and declared a lemon in another jurisdiction)
  • has been bought back by the manufacturer through the Canadian Motor Vehicle Arbitration Plan (CAMVAP)
  • was damaged by flood or fire
  • used as an emergency vehicle (ex: police, fire, ambulance)
  • used as a taxi or limo
  • rented on a daily or another short-term basis
  • written off and branded as salvageable
  • has been made to look as if it is a better model than it actually is (or "rebadged")
  • is significantly different from the original or advertised model of the vehicle
  • damaged and the cost of repairs from one incident was more than $3,000 (If the actual total cost of repair is known, the dealer must tell you.)
  • new to Manitoba, and if so, where it was previously registered.
  • Licensed dealers must also tell you any other facts about the history or condition that might affect your decision to buy.

Canadian Motor Vehicle Arbitration Plan

Consumers can also choose to participate in the Canadian Motor Vehicle Arbitration Plan (CAMVAP). While this is voluntary, consumers must give up their right to sue to participate. Essentially, the consumer and manufacturer plead their respective cases before an impartial arbitrator. The arbitrator can then decide what the manufacturer must do, such as:

  • buy back the vehicle with a price reduction based on the vehicle's use,
  • buy back the vehicle at full price,
  • reimburse the consumer for repairs,
  • make repairs,
  • payout of pocket expenses or,
  • the manufacturer is not liable for any costs.

According to the CAMVAP annual report, in 2016, in Manitoba, 11 arbitrations were started. In one case, the parties agreed before a decision was rendered. In a second case, the parties negotiated an agreement that the arbitrator recorded. The other 9 cases resulted in 9 arbitrator decisions as follows:

  • one case where the arbitrator ordered the manufacturer to buy back the vehicle with a reduction in price for usage,
  • three cases where the arbitrator ordered the manufacturer to make repairs,
  • five cases where the arbitrator found the manufacturer not liable.

Court

Finally, consumers also have the option to take a manufacturer or dealer to court. While, as indicated above, the legal costs of taking someone to court may outweigh the benefits, consumers may be able to save costs by going through small claims court instead. Small claims court awards in Manitoba are capped at $10,000.00. So if a consumer wants a manufacturer to reimburse or replace a vehicle, she should file a claim in Queen's Bench. However, if the consumer wants the manufacturer to pay for repairs, small claims would provide a cost-effective solution.

Enjoy this subject? Checkout these articles:

Beating parking tickets 

Right to Silence: Parking tickets

Disclaimer - Legalese

This article is presented for informational purposes only. The content does not constitute legal advice or solicitation and does not create a solicitor-client relationship (this means that I am not your lawyer until we both agree that I am). If you are seeking advice on specific matters, please contact Philippe Richer at 204.925.1900. We cannot consider any unsolicited information sent to the author as solicitor-client privileged (this means confidential).