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New Chrysler Company Will Honor Lemon Law Obligations

(Phoenix, Ariz. – June 4, 2009) – Attorney General Terry Goddard today announced that Fiat and the new Chrysler Group LLC have agreed to honor the “Lemon Law” rights of existing Chrysler owners when the new company effectively takes control of the U.S. automaker later this month, pending court approval. 

State Lemon Laws provide consumers with rights and procedures to obtain a refund or a replacement vehicle if a new vehicle develops a significant problem that can’t be repaired after a certain number of repair attempts. Details about Arizona’s law are below.   

Goddard said it was a significant question whether the new Chrysler Group LLC would be required to honor Lemon Law rights for vehicles sold or leased by the company prior to the upcoming closure of the “Old Chrysler” through the bankruptcy court.   

Fiat negotiated with a group of state attorneys general and agreed to honor all the rights consumers had under the “Old Chrysler” to seek and obtain a refund or replacement vehicle if their vehicle has a significant or recurring problem. The agreement is contained in the Bankruptcy Court judge’s order issued June 1. 

State attorneys general commended Fiat and the other Chrysler Group LLC partners for reaching the formal agreement on Lemon Law protections for consumers. They called the agreement a significant “win” for consumers nationwide.   

According to the court order, the new Chrysler company “will recognize, honor and pay liabilities under Lemon Laws for additional repairs, refunds, partial refunds (monetary damages) or replacement of a defective vehicle . . . on vehicles manufactured by the Debtors [Chrysler] in the five years prior to the Closing . . .”   

The court order also provides that the new company has agreed to continue addressing Lemon Law claims (to the extent that they are Assumed Liabilities) using the same or substantially similar procedural mechanisms previously utilized by the Debtors [Chrysler].”    

The states said the “procedural mechanisms” referred to in the court’s order means state-run or third-party Lemon Law dispute arbitration programs set up under individual state Lemon Laws to help consumers and manufacturers settle Lemon Law disputes. 

Goddard also said the states will be watching the GM bankruptcy carefully for similar issues. 

Arizona’s Lemon Law

The Attorney General said that Arizona’s Lemon Law protects consumers in a number of ways and consumers should consult the law or an attorney if their car does not operate in a reasonable manner.   

A new car is covered by the Arizona Lemon Law for the manufacturer’s warranty period or two years or 24,000 miles, whichever comes first.  The covered period begins on the date that the consumer receives the vehicle.  If the manufacturer fails to adequately repair the vehicle after four attempts, the manufacturer must accept return of the car or replace it with a new car. 

A used car is covered by the Arizona Used Car Lemon Law if a major component breaks within 15 days or 500 miles after the car was purchased, whichever comes first.  The purchaser of a used car is still responsible for a small portion of the repair costs if the car breaks.  The recovery for the purchaser of a used car is limited to the purchase price of the car.  

For more information on the Arizona’s Lemon Law, visit the Arizona Attorney General’s website.