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The Lemon Law Guide: Secret Warranties

Few car owners know that "secret warranties" exist. Automakers are reluctant to make them public for fear it would dampen confidence in their product and increase their legal liability. Most motorists who get compensated for repairs to blown engines, burned-up transmissions or paint that has turned chalky white or peeled away, are the ones who read consumer news sites, yell the loudest and refuse to take no for an answer.

The 4-Step Process in Secret Warranties

1. Service advisories are posted on an automaker's internal computer network. They offer troubleshooting tips and allow the dealer to bill the manufacturer for the repair. This information is never divulged to the customer.

2. If the defect grows in scope into a more involved solution requiring upgraded parts, automakers then draw up a formal technical service bulletin (called a TSB or DSB) and distribute the bulletin to dealers and US and Canadian government agencies. The service bulletin is only issued after the manufacturer has what it thinks is the solution for the defect. TSBs issued by Chrysler, Ford, and GM will usually spell out clearly which base warranty will cover the repair (emissions warranty, bumper-to-bumper, etc.). Interestingly, Asian and European automakers are vague in their description of their warranty obligations. Honda, for example, uses the term "goodwill" as a euphemism to describe its warranty extensions.

3. As more and more customers hear about TSBs for a common factory-related defect, and find that the base warranty is clearly inadequate to deal with the scope of the problem, pressure on dealers builds. With customers pressing for after-warranty help, the dealers put pressure on the manufacturer. This can lead to a second TSB, sent only to dealers, extending the warranty coverage and leaving to the dealer's discretion the amount that will be covered or refunded to the customer.

4. In some cases, the aggravation gets too great and the automaker decides to issue a press release followed by an owner notification letter (sent to first owners only, at their last known address) which clearly spells out what all owners will get and which vehicles are involved. A special bulletin or letter is also sent to dealers to ensure they follow the guidelines. Ford calls these Owner Notification Policies, GM calls them Special Policies, and Chrysler calls them Owner Satisfaction Notifications. No matter the euphemism, they are an extension of the original warranty, applied to vehicles that may have been bought new or used.

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