Used Car Rule at LAWDOG® Center

Used Car Industry

The used car industry consists primarily of franchised new car dealers, which accept trade-ins on new automobiles; and independent dealers, not affiliated with an auto maker, whose principal business is the sale of used cars. (This is, of course, a great simplification, since the auto industry is huge, consisting of wholesalers, auto auctions, repossessors, transporters, and finance.) Most states have differing laws which govern the ability of individuals or businesses to sell used cars without a license. For example, one state may permit an individual to sell up to five cars per year without obtaining a license, while other states are more or less restrictive.

A number of excellent publications are available free of charge from the U.S. Federal Trade Commission concerning Automobiles. For specific example, see "A Dealer's Guide to the Used Car Rule" in text format here.

Used Car Rule

In general, car dealers who sell more than five used vehicles in a 12-month period must comply with the Federal Trade Commission’s Used Car Rule. Banks and financial institutions are exempted, as are businesses that sell vehicles to their employees, and lessors who sell leased vehicles to lessees, an employee of the lessee, or to buyers found by the lessee. In the District of Columbia, Puerto Rico, Guam, the U.S. Virgin Islands, American Samoa and all states except Maine and Wisconsin, which have similar laws, the Used Car Rule requires that dealers post specific disclosures on used vehicles. These disclosures, which are now quite common, are known as the Buyers Guide.

A covered seller must post a Buyers Guide before "offering" a used vehicle for sale. A vehicle is offered for sale when a customer is permitted to inspect for purpose of buying, even if car is not fully prepared for delivery. This requirement also applies to used vehicles for sale on lot through consignment, power of attorney, or other agreement. At public auctions, dealers and the auction company must comply. The Rule does not apply at auctions that are closed to consumers.

Previously titled or not, any vehicle driven for purposes other than moving or test driving, is considered a used vehicle, including light-duty vans, light-duty trucks, demonstrators, and program cars with a gross vehicle weight rating (GVWR) of less than 8,500 pounds, a curb weight of less than 6,000 pounds; and frontal area of less than 64 square feet. Exceptions to Rule include motorcycles, vehicles sold for scrap or parts if dealer submits title documents to obtain appropriate state salvage certificate, and agricultural equipment

A disclosure document that gives consumers important purchasing and warranty information, the Buyers Guide tells consumers:

whether the vehicle is being sold "as is" or with a warranty;
what percentage of the repair costs a dealer will pay under warranty;
that oral promises are difficult to enforce;
to get all promises in writing;
to keep the Buyers Guide for reference after the sale;
the major mechanical and electrical systems on the car, as well as some of the major problems that consumers should look out for; and
to ask to have the car inspected by an independent mechanic before they buy.

If used car transaction conducted in Spanish, rules require posting of Spanish language Buyers Guide on vehicle before offered for sale.

The Buyers Guide must be posted prominently and conspicuously on or in a vehicle when a car is available for sale, and in such a way that both sides are readable. That means you can hang the Guide from the rear-view mirror inside the car or on a side-view mirror outside the car. The Guide also can be attached to a side window. A Guide in a glove compartment, trunk or under the seat is not conspicuous.

The Guide may be removed for a test drive, but must be replaced immediately upon completion of test drive.

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