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The Life of a Lemon: Regulatory landscape, lesser-known facts

Downtowngal via Wikimedia | CC BY 3.0

A recent WGVU News probe uncovered three victims, forged paperwork and odometer fraud all related to one vehicle, which helped trigger a state investigation.

In this report, we learn more about the landscape surrounding the life of a lemon.

Hear part one of 'The Life of A Lemon' here.

"Salvage title, which is orange, unlike a standard Michigan vehicle title, which is green -- the salvage title is for what we would refer to as a distressed vehicle."

That’s Fred Woodhams, a spokesperson with the Secretary of State.

"A vehicle becomes distressed after one or more of its major parts has been wrecked or damaged," he says, "and the total estimated damage of the vehicle is from about 75 percent to 90 percent of its pre-damaged cash value."

Woodhams says the regulatory environment, and definition of 'salvage' and 'scrap' cars, can vary by state. 

In Michigan, salvage titling only applies to vehicles six model years old or younger.

"Say there was an accident and the vehicle was damaged to a significant degree," Woodhams says. "[If it was more than six model years old] it wouldn’t necessarily get that salvage vehicle [title] because it’s been on the road for quite some time, and its value is much reduced from its original sale."

Paperwork obtained by WGVU indicates the 2004 Honda Odyssey may have been in some sort of wreck after six model years had passed – which is backed up by a mechanic’s report from one of the victims, and a VIN report we ran.

But it's not something we can prove just off state paperwork.

More importantly - with a green or 'clean' title, a consumer may have no idea to look for anything wrong.

"Most of the abuses I think that I see happen in what I consider the subprime market."

That’s Michael Nelson, a Grand Rapids attorney who specializes in consumer protection issues.

We asked him to take a look at the Honda paperwork, including a one-page handwritten contract, which he says may violate the Truth in Lending Act, among other items.

"It definitely doesn’t comply with that," Nelson says. "And probably does not comply with the Michigan statutes either."

We found other issues among a total of about two dozen court cases filed against two of the dealers involved in our previous report: Lee Auto Export and Tam Van Vo – a man who may have behaved as a dealer, but isn’t actually licensed as a dealer by the state.

Those allegations include improper repairs and undisclosed material defects, such as cars sold without airbags without a customer’s knowledge.

So we asked, are used car dealers required to disclose missing airbags?

Not exactly.

"Vehicles are required to have airbags," Woodhams says in an email, "but dealers don't have a responsibility to ensure the airbags are in the vehicle."

"If a dealer falsely represented that a vehicle had airbags, to allege fraud we'd have to prove the dealer had knowledge or was reckless in the representation."

Nelson says one of the best things you can do to protect yourself is do some homework before you buy. That includes running a VIN report.

"They [VIN reports] don’t get everything, but you will get some things," he says. "You’ll probably find out if it’s been in an accident, you can probably find out if it’s been owned by an insurance company, and some other things that might raise red flags."

"And it might also tell you if the mileage showing on the odometer isn’t right. If the mileage is less than the last time it was sold two years ago, that’s a problem."

If you think you are a victim of automotive fraud, the Secretary of State encourages you to file a complaint.

You can find that, as well as searchable automotive dealer and repair listings and other resources at Michigan.gov/SOS.

Check out part one of 'The Life of A Lemon' here.

Hilary is a General Assignment and Enterprise reporter for WGVU Public Media. She joined WGVU in September 2014 after several years of experience as a local news reporter, anchor and photojournalist in Midland, Saginaw and Bay counties. She's also worked as a financial and business reporter and audio field producer.
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