Unload Your Lemon - finance

Kiplinger's Personal Finance Magazine, Sept, 2001 by Ed Henry

CARS | Drivers with CHRONIC CLUNKERS are putting the squeeze on carmakers.

AFTER 30 YEARS of driving Toyota Tercels, Celicas and Camrys, Al Pinsky of Yardley, Pa., stepped up to the luxury-car ranks with the purchase of a spanking-new 1997 BMW 318i. But the step up to a BMW turned out to be a step down to disappointment.

Two months later, the "check engine" light came on, which proved to be just a foreshadowing of things to come. (For the engine light alone he made four trips to the shop in three years.) Then a throttle cable broke, a side-view mirror wouldn't heat up and a ratchet to hold the seat belts tight failed. The steering wheel lock, door locks and fuel gauges all had to be repaired.

Throughout the ordeal, Pinsky followed Pennsylvania's "lemon law" procedures, keeping records and corresponding with the manufacturer in hopes of getting the car replaced. The goal of the lemon laws in the 50 states and the District of Columbia is to get a chronically problematic car replaced or bought back without your necessarily hiring an attorney or going to court. Typically, you're eligible for relief after four attempts (three in some states) to have a "substantial defect" repaired. (A substantial defect is defined as something that impairs the use and value of the vehicle.) You can also seek relief if your car is out of service for 30 days.

Despite Pinsky's patient compliance with the procedures, all he got from BMW was an apology and a recommendation that he take his car to another dealership 30 miles from home. Pinsky endured the 60-mile round-trip for a time, but eventually he got fed up and took his case to a lawyer who specializes in lemon-law cases.

Early this year the case was settled. BMW returned the full value of Pinsky's $28,500 car, minus a $300 mileage assessment, and paid his $2,000 in legal fees.

His lawyer, Craig Kimmel, whose firm has handled 17,000 lemon-law cases in the past decade, says: "You can stomp and storm and act like a raving lunatic, but as soon as you hire a lawyer, manufacturers are ready to settle." Kimmel's strategy was to sit down with the manufacturer's attorneys and work out a solution.

You may be tempted by the simplicity of the lemon-law process. And the process often does work effectively (see "THE DO-IT-YOURSELF REMDY"). But when the problems are serious and the manufacturer isn't offering any real remedies, don't be afraid to hire a lawyer.

One reason to get a lawyer is to make sure you don't feel outgunned when facing a manufacturer, which will likely have representation. In fact, in New Jersey manufacturers are required to have an attorney represent them at a lemon-law hearing. There's no such requirement for consumers. Says Robert Russo, president of the International Association of Lemon Law Administrators and director of New Jersey's lemon-law unit: "Many people go in alone thinking they've got a good case. But the company attorneys can convince the judge, arbitrators or mediators otherwise."

Your attorney can also sue, or threaten to sue, under the federal Magnuson-Moss Warranty Act, which supersedes state laws. Under the act, automakers are liable for as long as the car is under warranty--whether it's two years/24,000 miles on a Volkswagen, or ten years/100,000 miles on a Kia. (In contrast, most lemon laws cease to apply after two years.) Magnuson-Moss also makes hiring a lawyer financially feasible by forcing auto companies to pay your legal fees if you win.

And because those fees can run to tens of thousands of dollars, the risk of losing a case gives the carmaker a strong incentive to settle. "No manufacturer wants to run up $30,000 in fees in an argument over a $2,000 claim," says Douglas Hirsch of Sadis & Goldberg, in New York City.

While car quality has improved in the past two decades, taws to protect people from having to accept chronic problems with their cars have made an even greater leap. About 1,000 cars were bought back by manufacturers in 1980, but that number had soared to 50,000 by 1990, according to the Center for Auto Safety, an independent consumer-advocacy group. Today, about 100,000 lemons are bought back by manufacturers each year. The number of lawyers who handle only lemon-law cases has risen from "a handful" in 1980 to about 500 today, according to Clarence Ditlow, executive director of the center.

No statistics are kept on how many cars were bought back through the work of lemon-law lawyers versus the efforts of consumers themselves. But Ditlow credits the rise in the lawyers' ranks for having a "significant impact," both directly and indirectly.

And if you do have a chronic car problem, there's a good chance a lawyer will take your case. "From 60% to 70% of the people who call us have a valid lemon-law claim," says Vince Megna, a lawyer with Jastroch 8: LaBarge, in Waukesha, Wis.

You can find lemon-law lawyers with Web sites through Lemon Law America (www.lemonlawamerica .com) or the Center for Auto Safety (www.autosafety.org). For a more complete list, send a stamped, self-addressed envelope to CAS Lemon Lawyers, 1825 Connecticut Ave., N.W., Suite 330, Washington, DC 20009.