New Car a Lemon? What You Need to Know about Lemon Law in Arkansas

Buying a new vehicle can be an exciting, momentous step to take. Unfortunately, what should be a great experience can be marred by unseen vehicle defects or struggles to keep the vehicle running properly for day-to-day use. The Arkansas New Motor Vehicle Quality Assurance Act, also known as the Arkansas Lemon Law, provides some protections for consumers dealing with faulty new motor vehicles, but how do you know if the law applies to you? And, when it does, how do you go about getting a refund or replacement for your troublesome purchase?

Who and What is Covered?

Consumers in Arkansas who buy or lease and register and title a motor vehicle are protected by the state Lemon Law. The Lemon Law does not apply to mopeds, motorcycles, the living quarters of motor homes, or vehicles (except for motor homes) weighing more than 14,000 pounds. If a vehicle weighing more than 10,000 pounds is substantially altered after its initial sale or lease by a dealer, the Lemon Law also does not apply.

The Lemon Law only applies for a set period of time known as the Quality Assurance Period. This period lasts for either 24 months from the original date of delivery of the vehicle to the consumer or for 24,000 miles of operation by the consumer, whichever is longer. Even if there are multiple owners during the Quality Assurance Period, the Lemon Law remains active for the full period.

What Does Arkansas’ Lemon Law Do?

The Arkansas Lemon Law creates a presumption that consumers are entitled to a refund or replacement for a vehicle covered by the law if the manufacturer or dealer has unsuccessfully attempted to repair defects or conditions in the vehicle a certain number of times. These defects or conditions include any substantial impairments to the vehicle’s use, market value, or safety; anything that makes the vehicle out of line with the manufacturer’s express warranty or makes the vehicle unfit for ordinary use.

Presumption in your favor, however, can be rebutted by manufacturers. To do so, the manufacturer must be able to show that the defect or condition either:

• Does not substantially impair the use, value or safety of your vehicle; or
• It is the result of an accident, abuse, neglect, or unauthorized modification or alteration of the vehicle by anyone other than the manufacturer, its agent, or authorized dealer.

If your vehicle has any defects or conditions, you should contact the manufacturer or dealer you purchased your vehicle from immediately. However, if the manufacturer or dealer makes repairs to fix these issues, you should be aware that you will be responsible for paying for repairs if they fall outside of the manufacturer’s warranty. Most manufacturers provide limited warranties for one year or the first 12,000 miles, whichever is shorter.

Consumers should check the warranty booklet to consult the terms of the warranty. If you are leasing your vehicle, consult the terms of your leasing agreement. Always keep a record of your repair receipts, and if the vehicle is later proven to be a lemon, you may be entitled to reimbursement for repair costs.

Each time your vehicle is returned for repair, you are entitled to a detailed statement that itemizes the following:

• Any and all charges for parts and labor, and
• A general description of the problem, and
• A list of all work performed, and
• Odometer readings for when you brought your vehicle in for repair and when you picked it up following the repair, and
• Dates for when you brought your vehicle in for repair and when you picked it up following the repair.

Always keep a record of these statements.

What are Your Options if You have a Lemon?

If your vehicle is financed through the manufacturer or its subsidiary or agent, and you choose a replacement for your vehicle, the manufacturer must ensure that you are not required to enter into any new financing agreement that would place a financial obligation upon you beyond those of the original financing agreement; however, you will need to pay a reasonable allowance for vehicle use.

A reasonable allowance for vehicle use is defined by law and is calculated by multiplying the purchase price of the vehicle by the mileage on the vehicle when it was first brought to the manufacturer or dealer for repair. That product is then divided by 120,000 miles to determine the dollar amount of the allowance.

For example, a vehicle purchased for $20,000 first brought into a dealer for repair of a relevant defect with a mileage of 12,000 miles would be calculated in this way:

$20,000 x 12,000 miles = 240,000,000;

240,000,000 / 120,000 miles = $2,000.

In this case, if you were to choose to have your vehicle replaced, then you would be responsible for a reasonable allowance for vehicle use of $2,000.

If you opt for a refund of your vehicle, you will receive a full refund of the vehicle minus the same reasonable allowance for vehicle use. The refund also includes, but is not limited to, other costs associated with your vehicle purchase such as:

• Credits and allowances for trade‐in vehicle;
• Costs of options and other modifications added by the manufacturer or its authorized dealer;
• Costs of sales tax, license and registration fees, and finance charges;
• Charges for renting a similar vehicle while the original vehicle was out of service because of the defect; and
• Charges for extended warranty coverages provided by the manufacturer, its subsidiary, or its agent.

Under the Arkansas Lemon Law, your leasing agreement ends the moment you return the vehicle; however, you are not responsible for late fees associated with ending your lease early due to this reason.

How to Get a Refund or Replacement Under Arkansas’ Lemon Law

STEP 1: Making Your Case

First, you must show that the manufacturer has had a reasonable opportunity to repair the applicable defects or conditions in your vehicle and has failed to do so, and that the Lemon Law applies to your vehicle. You may use any of four options to show this:

• There have been three unsuccessful repair attempts to repair the same defect or condition, AND the owner has provided the manufacturer with a final opportunity to cure the defect or condition, AND the manufacturer either fails to cure the defect or condition or the repair attempt is unsuccessful;
• If the defect or condition is one that is likely to cause death or serious bodily injury, AND there has been one unsuccessful repair attempt, AND the owner has provided the manufacturer with a final opportunity to cure the defect or condition, AND the manufacturer either fails to cure the nonconformity or the repair attempt is unsuccessful;
• The vehicle is out of service by reason of repair, or attempt to repair, any defects or conditions for a cumulative total of at least 30 calendar days; or
• There have been five or more attempts to repair any defects or conditions which together substantially impair the use and value of the motor vehicle to the owner.

If you choose option (1) or (2), you must provide the final opportunity for the manufacturer to cure the defect or condition by a letter sent to the manufacturer by certified or registered mail. You should keep a photocopy of the letter and the certified or registered mail receipt for your records. Once the manufacturer receives the letter, it has 10 days to schedule a final repair attempt. If the manufacturer fails to do so, it cannot later assert that it did not have reasonable opportunity to repair your vehicle.

STEP 2: Before You Can File a Lawsuit

Before suing to enforce your rights under the Arkansas Lemon Law, you first must seek a refund or replacement of your vehicle directly from your manufacturer by filing a claim with its Independent Dispute Settlement Program (IDSP). You will not have to pay fees for the settlement program and will have the unconditional right to choose either a refund or a replacement. You should send a demand letter to both the manufacturer and the manufacturer’s IDSP by certified or registered mail and keep a photocopy of the demand letter and the certified or registered mail receipt for your records.

The IDSP will provide you with forms and instructions on how to assert your claim after your demand letter has been received. Barring an extension for good cause, your claim must be scheduled for a hearing, heard, and decided within 40 days of receipt your demand letter. In Arkansas, you are entitled to an in-person hearing before a board of independent arbitrators where you can present testimony and evidence. While you may represent yourself, it is advisable to hire an attorney to represent you and your claim.

If you choose to accept the decision from the IDSP proceedings, the manufacturer cannot appeal and must comply with the terms of the decision within 30 days.

STEP 3: Going to Court

If you choose to deny the decision from the IDSP proceedings, then you can sue the manufacturer to enforce your rights under the Arkansas Lemon Law. If you win in court, then you may also be entitled to attorney’s fees associated with your lawsuit and may have other rights or causes of action outside of the Arkansas Lemon Law, as well.

Bought a Lemon? We Can Help

While the Arkansas Lemon Law is intended to protect Arkansas consumers, it can be a complicated process that requires a practiced hand in dealing with the many different components of the law. It is important to comply with all the requirements and be prepared to present your case before the manufacturer’s IDSP and, potentially, before a judge in order to assert your rights under the Arkansas Lemon Law.

Having a lawyer help you navigate the confusing waters of asserting a claim under the Arkansas Lemon Law is key to successfully doing so. If you have concerns about your new vehicle and would like to explore your legal options, the Law Group of Northwest Arkansas PLLC’s experienced attorneys can help. Call us at 479-316-3760 for more information.