The Federal Trade Commission yesterday endorsed proposed legislation that would strength warranties given to purchases of new automobiles.
FTC Chariman Michael Pertschuk told the House Commerce subcommittee on consumer protection that better auto warranties are needed because rapidly increasing new car prices "make the consequences of owning a 'lemon' even worse for the unlucky few."
Existing warranties do not cover many of the added costs of owning a "lemon," Pertschuk told the subcommittee.
The heaviest penalty against the owner of a problem car comes when the owner finally decides just to sell the car, usually much earlier than it would normally be sold by the first owner, Pertschuk said.
"This can amount to an unexpected loss of several thousand dollars," he said, adding that "unfortunately a trade-in lemon inevitably becomes a used lemon to the next buyer."
Pertschuk said some of the penalties now suffered by the owners of "lemons" under present warranty laws include the cost of time, mileage, and inconvenience of repeated trips to the dealer, as well as the added expense of substitute transportation while the car is in the shop.
"Another legal hurdle for the lemon owner is the lack of any clear standard or definition of a 'lemon,'" Pertschuk said. The term usually refers to an automobile with chronic problems almost from the day it is purchased.
The proposed legislation mandates so-called "full warranties," which give consumers a wide range of remedies, including refund or replacement and incidental damages in the case of chronically-troubled cars.
Bill sponsor Rep. Bob Echkardt (D-Texas) told the subcommittee on Tuesday that his "Automobile Warranty and Repair Act" came out of hearings into the auto repair industry last year.
Those hearings documented apparent incentives from automakers for repair shops not to perform warranty work, and resulting widespread dissatisfaction with auto warranties.