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Customer can sue CarMax for selling defective car, court rules

Consumer groups charge that the auto dealer is not transparent about inventory that is under recall

Photo (c) jetcityimage - Getty Images
A CarMax customer who argued that the nation’s largest used car dealership violated consumer protection laws in California when it sold her a defective Hyundai can proceed with her case,  a state appellate court ruled this week.

CarMax has dominated the used car industry thanks to its attractive stores, user-friendly website, anti-haggle policy, and the promise of a Certified Quality Inspection on all its inventory. But some consumer groups have charged that it’s all just cover-up for getting “lemons” off the lot at an inflated price.

The Sacramento advocacy group Consumers for Auto Reliability and Safety (CARS) last year found that nearly 25 percent of the inventory at eight CarMax locations was under recall and had not been repaired.

CarMax at the time claimed that “manufacturers do not allow CarMax to complete recall repairs” and that they were transparent with customers about cars under open recalls. But a three judge panel in the Fifth District Court of Appeal in Fresno disagreed, ruling 2-1 that a customer had a valid claim when she argued that CarMax is violating California’s Consumer Legal Remedies Act and the Unfair Competition Law.

The case was hailed by three consumer groups -- CARS, the Center for Auto Safety, and U.S. PIRG -- and filed by three attorneys on behalf of Tammy Gutierrez, a Bakersfield woman who purchased a 2008 Hyundai elantra in 2013.

CarMax open to potential liability

According to the consumer groups following the case, CarMax told Gutierrez that the Hyundai she eventually purchased had passed a rigorous 125-point inspection. But after buying the vehicle, she discovered that it was under recall due to brake lights that could intermittently stop working without warning, a defect that Hyundai warned “could increase the risk of a crash.”

Gutierrez tried to sue in 2016, without the help of an attorney, but a trial court sided with CarMax and dismissed her lawsuit.

Armed with legal help, Gutierrez appealed the decision, leading to last Thursday’s ruling. Legal experts say the case exposes CarMax to potential liability by allowing her lawsuit to go forward.

“They said she can go forward with the process. They didn’t say she will win,” a law professor explained to the Richmond Times-Dispatch.

CarMax told the paper in a statement that “CarMax has led the industry in recall transparency and shares vehicle specific recall information in-store and online. “

The auto-dealer added that “the California Court of Appeal’s opinion supports the disclosure of open recalls when a dealer is aware of them, which is CarMax’s current practice. The opinion is not a final decision in the case.”

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