When touting auto systems checks, it’s wise to recall recalls

Make, model, and cup holders are considerations, of course, but what really matters to a prospective used car buyer is whether the vehicle’s systems check out. It just makes sense, since so many of those systems are tied to safety. But it’s not easy for consumers to tell if they’re buying a lemon or a creampuff. Many dealers try to assuage that concern by advertising that their used cars have passed multi-point checks. FTC complaints charge that General Motors and two of the largest used car dealers in the country touted their purportedly rigorous inspections and yet failed to disclose a fundamental fact: that the cars they sold to some consumers were subject to open – in other words, unrepaired – safety recalls. 

In advertising its “Certified Pre-Owned Vehicles,” GM made promises like this:

Our 172-Point Vehicle Inspection and Reconditioning Process is conducted only by highly trained technicians and adheres to strict, factory-set standards to ensure that every vehicle’s engine, chassis, and body are in excellent condition. The technicians ensure that everything from the drivetrain to the windshield wipers is in good working order, or they recondition it to our exacting standards.

But according to the FTC’s complaint against GM, the company advertised many used vehicles at its local dealerships without clearly disclosing they were subject to unaddressed recalls that implicated safety, including a key ignition switch defect that can affect engine power, power steering problems, glitches that can impair airbag deployment, and defects that can cause engine stalls.

In a similar vein, Jim Koons Management Company, which has 15 dealerships in the Mid-Atlantic region, offered customers a guarantee that “Every certified Koons Outlet vehicle must pass a rigorous and extensive quality inspection before it can be sold. Our certified mechanics check all major mechanical and electrical systems and every power accessory as part of our rigid quality controls.” The FTC alleges the company didn’t clearly tell buyers that some cars had been recalled for safety concerns ranging from alternator-related defects that could cause vehicle shutdowns or even electrical fires to a rear suspension defect that could result in a fuel leak or fire.

Lithia Motors, which has more than 100 dealerships in the West and Midwest, highlighted its dealer-backed “60- Day/3000 Mile” warranty. “[V]ehicles are put through an exhaustive 160-checkpoint Quality Assurance Inspection,” said Lithia. “We inspect everything from the tires and the brakes to suspension, drive train, engine components and even the undercarriage.” But according to the FTC, Lithia didn’t clearly tell people that some of those cars were subject to safety recalls and hadn’t been fixed.

The proposed orders will change how those companies advertise their used cars and address recalls. For example, they won’t be able to claim their used vehicles are safe or have passed rigorous inspection unless they’re free of unrepaired safety recalls or the companies clearly disclose the possibility of the recalls close to these claims.  Violating this requirement or the order’s prohibition against misrepresentations about safety could result in civil penalties.

There’s another key provision aimed at protecting buyers’ safety. The three companies will have to contact recent customers who bought used cars to let them know that a safety recall may be pending for their vehicle.

You can file public comments about the proposed settlements by February 29, 2016. 

What can others in the industry take from these cases? Before touting a rigorous multi-point safety inspection, think about that all-important extra point: What would customers think about a dealership that touts a supposedly rigorous inspection process and yet keeps mum about unrepaired safety recalls?