Lemon law may not cover leased vehicles

Consumers who lease vehicles should not automatically assume that the vehicle will be covered under either state lemon laws or Federal warranty laws. A recent ruling in Arizona makes it clear that the rights of those who lease are less than those who buy.

More below.

Lemon laws protect owners, but not those who lease

The purpose of both Federal warranty laws and state lemon laws is to protect vehicle owners from the problems associated with habitually defective vehicles. It’s one thing to take a car into the shop for a repair that is covered under warranty, but it is something else again to do it ten times. Since the first lemon law was passed in 1982, all 50 states have passed legislation to protect consumers from problem vehicles.

But consumers who elect to lease, rather than buy, should look into their particular state’s lemon law rather carefully. While many states protect leased vehicles, some do not. And as one consumer found out in Arizona recently, a law which does not protect you if you lease may leave you owning a lemon.

The unanimous ruling by the Arizona Supreme Court stated that only a vehicle’s “owner” can be protected by either the state lemon law or the Federal Magnuson-Moss Warranty Act, which is a blanket consumer protection law. In the particular lease agreement in the lawsuit involving a defective Jeep, the court ruled that the “owner”, in this case, is the auto dealership that holds the lease agreement. This, unfortunately, left the man who leased the vehicle in possession of a badly defective vehicle with no recourse.

Perhaps half of state lemon laws explicitly state that they protect the owners of leased vehicles. The remainder do not, as protection under these statutes can vary widely from state to state. Those consumers who elect to lease vehicles in states which do not cover leases may be taking on a risk that is difficult to justify. Ownership of a vehicle is almost always a better deal than leasing; the additional costs of taking on a lemon law risk may reduce the appeal of a leased vehicle.

It should be noted that this ruling came from a state Supreme Court, and not the one in Washington, D.C. As such, this law affects only residents of Arizona. Courts do pay attention, however, to rulings in other states, and it may be reasonable to assume that the conclusion reached by one state court may be reached by another , as well.

What does this mean for those who lease? First and foremost, anyone considering leasing a vehicle should do some research and find out if the laws of that particular state cover leased vehicles. If so, then there is no problem. Otherwise, it may make more sense to consider purchasing a vehicle instead. While few vehicles turn out to be true lemons, those who lease such vehicles in states without lemon law protections are still obligated to fulfill the terms of their lease, which could make for a rather unpleasant and expensive proposition.

Consumers who regularly lease their cars, vans or trucks, would be wise to contact their state legislators about the issue in order to urge them to pass legislation explicitly protecting such vehicles through defect law.

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