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Avoid ‘AS-IS’ used car sales contracts

Have your own mechanic inspect the vehicle and know your legal rights before you buy “as is.”

If I had a dime for every consumer who emailed me to complain about their ‘as-is’ used car purchases, I could have bought every one of them¬†legitimate service contracts (more on those below).

To a person, each of those consumers recklessly opted for as-is because it was what they could afford. Not one of them had an independent mechanic inspect the vehicle before signing the deal. Most of them didn’t even bother to ask why their dealers were selling the jalopies ‘as-is.’

“If you buy a car ‘as is,’ you must pay for all repairs, even if the car breaks down on the way home from the dealership,” wrote the Federal Trade Commission’s (FTC) consumer protection staff in this excellent guide about auto service contracts and warranties.

But that’s not exactly the case in Tennessee.

Kevin Snider, certified fraud examiner and founding attorney of your #WiseChoice law firm, Snider & Horner PLLC, said in Tennessee, an as-is sales contract is not always absolute. He said Tennessee consumer law offers as-is car purchasers protections beyond what’s in the bill of sale. Those protections include what’s called unjust enrichment — proof the dealer knew something was wrong with the vehicle before the sale.

“If a Tennessee dealer has specific knowledge about a substantial defect that is not obvious to the purchaser and doesn’t disclose it, that dealer could be held liable under fraudulent concealment or unjust enrichment,” Snider said. Unjust enrichment is the civil equivalent of theft of property, Snider said — essentially claiming the dealer stole your money knowing something was terminally wrong with the vehicle.

If your auto budget leaves you no choice but to consider as-is, you should only shop dealerships that can prove they run those vehicles through inspection and disclose the inspection’s details. The dealership should allow you to have your own mechanic inspect the vehicle, and it should offer some sort of guarantee on that as-is vehicle for the customer’s peace of mind.

You’re better off buying a used vehicle from a reputable dealership’s certified pre-owned program. A certified pre-owned program will include warranty protections or consumer guarantees that typically don’t apply to used cars. For example, Principle Toyota, your #WiseChoice Memphis auto dealer, offers not one, but two warranties with its certified preowned program: a 12-month/12,000-mile limited comprehensive warranty that covers any repair or replacement of components that fail under normal use due to defect in materials or workmanship and a 7-year/100,000-mile limited powertrain warranty, plus one free year of roadside assistance.

In its guide, the FTC said purchasing a dealer-backed service contract on a used or as-is vehicle might help trigger a state-regulated “implied warranty” on that vehicle. “There are two common types of implied warranties. Both are unspoken and unwritten, and based on the principle that the seller stands behind the product,” wrote the FTC. “Under a warranty of merchantability, the seller promises the product will do what it is supposed to do. For example, a toaster will toast, or a car will run. If the car doesn’t run, implied-warranties law says that the dealer must fix it so that the buyer gets a working car.

“A warranty of fitness for a particular purpose applies when you buy a vehicle on a dealer’s advice that it is suitable for a certain use, like hauling a trailer. Used cars usually are covered by implied warranties under state law.”

The FTC listed specific questions you should ask before you buy an auto service contract. Find them here.

In short, if you must consider an as-is sale, you better be buying from a reputable used car dealer — and you better know what your rights are under your state’s consumer protection laws.

Copyright 2022 Wise Choices TM. All rights reserved.

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