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Lease a Lemon? You're in Luck

Law kicks in today to protect customers whose new leased car turns out to be a dog

By Patricia Sabatini, Post-Gazette Staff Writer

Eighteen years ago, Pennsylvania was among the first batch of states to pass an automobile lemon law to protect new car buyers from getting stuck with a clunker. Today, the state becomes one of the last to extend coverage to leased vehicles, an increasingly popular way for consumers to drive off with a new car.

"It's a long-overdue reform," said Rosemary Shahan, director of Consumers for Auto Reliability and Safety, a consumer advocacy group in Sacramento, Calif. "Just about every other state has done that."

Lemon law advocates have been pushing for the change, which was signed into law in December and takes effect today, for nearly five years. The revision is retroactive, meaning consumers who leased new vehicles before today are covered, although manufacturers are expected to challenge the effective date in court, lemon law lawyer Craig Thor Kimmel said.

"I'm sure their position won't be upheld," said Kimmel, whose suburban Philadelphia firm Kimmel & Silverman is one of the largest lemon law practices in the country.

In Pennsylvania, if a substantial defect isn't repaired after three attempts or the vehicle is out of service for a total of 30 days, it's considered a lemon and the owner is entitled to a refund (less a small deduction for mileage).

Lemon laws are intended to force a reluctant manufacturer or dealer to live up to a vehicle's warranty, and prevent consumers from spending their lives running to the repair shop.

In Pennsylvania, if a substantial defect isn't repaired after three attempts or the vehicle is out of service for a total of 30 days, it's considered a lemon and the owner is entitled to a refund (less a small deduction for mileage).

As long as the defect pops up for the first time within one year or 12,000 miles, the owner or lessee is covered.

If the manufacturer puts up a fuss, consumers can sue. Often they seek the aid of a lemon law expert such as Kimmel, who, like most lemon law lawyers, works strictly on contingency. If the consumer wins, the law requires the car maker to pay attorney fees. If the manufacturer prevails, Kimmel doesn't get paid.

Until now, the only recourse for a motorist who leased a lemon was to sue for relief under a federal breach of warranty statute. Kimmel said it was actually easier to win a case under the warranty statute than the lemon law because the former doesn't require proof of a "substantial" defect.

"There's actually a higher standard under the lemon law," he said.

Still, he said leased-car drivers should get speedier resolutions under the new lemon law, mainly because he expects manufacturers will now be more willing to settle claims before they wind up in court.

Under the lemon law, a defect is defined as any problem that "substantially impairs the use, value or safety" of the vehicle. That can include anything from a steering problem to water leaks or a bad paint job, Kimmel said. If a car develops major paint defects, such as bubbling or cracking, for example, that would be a substantial impairment to the value, he said.

The dealer has three tries to fix each defect, so three trips to the shop for separate engine, transmission and brake problems typically wouldn't qualify. Simple thumps and rattles don't meet the criteria, either. And it's hard to prove a case based on poor gas mileage, he said.

Besides the leased-car provision, the original version of the bill contained a branding measure aimed at protecting used-car buyers from unwittingly ending up with someone else's lemon.

The provision was stripped from the final bill after facing too much opposition in the Senate, Kimmel said. "We took what we could get."

Supporters intend to push for the measure again this spring, he said.

Pennsylvania currently requires dealers to tell consumers if they're buying a repurchased lemon, but the rule is hard to enforce.

The branding provision would have tried to ensure that buyers were informed by putting the state in charge of notifying consumers that they had purchased a buyback when the new owner's registration was processed.

Buyers would then be entitled to get their money back if the dealer hadn't previously made the disclosure.

The leased-car revision is the first big change to the Pennsylvania lemon law since it was enacted.

In 2000, roughly 20 percent of new cars and 26 percent of new light trucks on the road in the state were leased. That's up from about 6 percent of new cars in 1984 when the lemon law as passed.

"Twenty and 26 percent of the marketplace can't be ignored," Kimmel said.

Although Shahan, of CARS, applauded extending coverage to leased vehicles, she doesn't think highly of the leasing trend.

For one thing, she said, the contracts are so complicated, it's difficult for consumers to know if they're getting a good deal.

"There are all these charges they slip in there. If you drive over so many miles, or you get little dings in it, you pay through the nose."

In addition, some people use leasing as a way to get into a car they really can't afford.

"You turn in your leased car and lease another one. You never end up with any equity," she said.

"My advice to people is don't lease. The slogan we use here is 'leasing is fleecing.'"

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