To help boost consumer confidence in used cars, many manufacturers tout the benefits of their “certified” used car resale programs. However, the extent of repairs required for such a car to gain certified status has never been defined by well-established, accepted, industry-wide standards. The Federal Trade Commission (FTC) also recently issued a new ruling about used cars with certified status, with a specific reference to safety recalls, which may contribute to creating even more consumer confusion and potential danger.

lo-res_599072-sSpecifically, under the new ruling, used car dealers may now advertise that the pre-owned cars have been inspected and repaired, even if that particular car model was subjected to a safety recall for a problem that has not been fixed. In lieu of fixing the safety issues prior to sale, dealers instead must notify buyers that the car they are thinking about purchasing might be subject to a recall and provide information about how to check for recalls that might apply to their particular vehicle.

Politicians and consumer groups, including the Consumers Union, the Center for Auto Safety, and the Consumer Federation of America, were quick to criticize the new FTC ruling, arguing that the new rules would endanger the lives and safety of buyers who lack the time, ability, or willingness to conduct extensive research into safety recalls that may apply to their new purchase. The ruling also is at odds with the position of the National Highway Traffic Safety Administration, which has called for all used car dealers to identify and fix any item on a car that is subject to a safety recall, prior to its resale. However, this Administration lacks any authority to order or require such fixes, so used car dealers are not under any obligation to perform the repairs.

The FTC had defended its decision, arguing that its ruling will empower consumers, who now have a choice to purchase a used car from a dealership that confirms which safety recall–related repairs and replacements have been made, rather than one that does not. According to the FTC, this distinction will incentivize more used car dealerships to perform the repairs required to address the issues associated with recalls.

The reaction of the industry to the new ruling remains to be seen. Unfortunately though, a history of high-profile cases in which automobile manufacturers actively concealed crucial safety or pollution emission information suggests the potential for misleading tactics. In this case, the FTC ruling could have effects opposite those it intended, by making the car-buying process even more difficult and confusing for consumers seeking a safe and reliable used car.

Discussion Questions:

  1. What drives consumers to search for more information, or not? Which of these drivers is likely to function when consumers are looking for a used car to buy?
  2. How do your answers to the previous questions inform your predictions about the ultimate effects of the FTC’s ruling?

Source: Christopher Jensen, “Buyer Beware: ‘Certified’ Used Cars May Still Be Under Recall,” The New York Times, December 16, 2016