On Nov. 14, LSU professor David Kirshner purchased a 2006 Lexus GS 300 with only about 54,000 miles on it for $9,750. He thought it was a great deal.
Two days later, the transmission went out.
He ended up paying around $5,000 to have it fixed — about half as much as he paid for the car in the first place.
Kirshner felt cheated. He believes the transmission was busted when be bought it, and someone should have been responsible for warning him about it.
“At this point, I was thinking undoubtedly this didn’t happen in two days.”
But in Louisiana, there were two words given to Kirshner when he bought the car that meant it wasn’t the seller’s job to check for problems, legal experts say: “As is.”
The Federal Trade Commission’s Used Car Rule requires dealers to post a Buyers Guide in every used car they offer for sale. If the seller checks an option on this form labeled “As Is – No Warranty,” the dealer has no obligation to repair or take back a damaged vehicle. Even if, like in Kirshner’s case, a major defect is discovered within days of the sale.
There are some limited exceptions: A seller cannot waive the warranty if they know there is an issue with the vehicle.
“A bad faith seller is still liable,” said Drew Nordgren, a Baton Rouge attorney with Nordgren Law, which focuses on automotive litigation. “If I knew about it and concealed it from you, it’s as if the as if clause never existed.”
But proving whether or not the seller knew about a defect is difficult, sometimes impossible, Nordgren said. He often has to tell clients with buyer’s remorse that they don’t have much recourse.
“We would have to spend an enormous amount of time and effort to do discovery to establish that the seller knew about it,” he said. “I have to tell them every single time that I’m sorry, there’s really not too much I can do unless you want to spend possibly more in attorney fees than the car was worth to begin with,."
Some other states have stricter rules that require sellers to take more responsibility for finding and disclosing defects. Kirshner, Nordgren and others think the Louisiana Legislature should impose some of those rules.
But for now, Louisiana regulators urge buyers to get a thorough, independent inspection — something the seller legally has to allow.
“I’m always talking to consumers and asking if they did an inspection,” said Montie Wisenor, a compliance investigator with the Louisiana Used Motor Vehicle Commission. “Louisiana doesn’t have any kind of pre-sale inspection [by the seller], so there’s nothing to hang your hat on.”
"You wouldn't expect anything to be wrong"
Kirshner did get his GS 300 inspected, but said while the mechanic checked the engines and other parts of the car, he did not check the transmission. He asked about any issues at BR Autoplex and was told there were none the dealership knew of, and the Carfax report didn’t show any history of major issues, so he thought he was in the clear.
“It had such low miles, you wouldn’t expect anything to be wrong,” he said.
Kirshner purchased the car from Hamed Ghassemi at BR Autoplex, who purchased it from Oak View Auto Auction, who received it from Price LeBlanc Lexus, who received it as a trade-in vehicle. Ghassemi bought it at auction for $6,200, sales receipts say.
A Mannheim Market Report pulled on Jan. 24 valued cars of the same year, make and model at $7,200, and said the car was selling at retail for around $8,875. The reports track millions of car sales over a 13-month period.
When the transmission blew, Kirshner took the car to Price LeBlanc Lexus for a repair estimate without knowing the dealership had sent that same car to auction. He says a mechanic told him the car was on the lot recently and that Price LeBlanc knew it had transmission issues, which is why they sold it at auction.
“That’s when I realized I had been legally cheated,” Kirshner said. “If it hadn’t been for me happening to go to that Lexus dealership and someone revealing [that they knew the car had transmission issues] I would never know.”
Kirshner argues it’s hard to believe multiple sellers handled the vehicle without discovering there was a problem with the transmission.
Engin Sayal, pre-owned sales manager at Price LeBlanc Lexus, told The Advocate the dealership did not know about the transmission issues. He said the car went to auction because it was a 2006 model and they typically sell newer cars. Oak View Auto Auction said Price LeBlanc sends almost all of its vehicles to auction as “red light.”
Red Light, Green Light
The system for auctioning cars has a light system: “Green light” means the car has been inspected and is in good shape; “yellow light” means there are issues that the seller is disclosing; “red light” means it’s being sold as-is.
Price LeBlanc sold the Lexus GS 300 as “red light,” — as it does all vehicles it sends to auction, Sayal said.
“Anything over 50,000 miles, a certain age, with body damage, or with a bad Carfax we can’t sell,” said Sayal. “Every vehicle we sell at auction we run “red light,” meaning we didn’t inspect it. Anything we don’t keep, we don’t take the time to inspect.”
Ghassemi said he had no idea the car had transmission problems when he bought it at auction or sold it; he figured the car was sold 'red light' because it was 18 years old. He said he did not inspect the car before selling it to Kirshner — and wasn't required to — so he did not know what the specific issue was.
This is why the FTC mandates the Buyer’s Guide and encourages buyers to get their own inspection, Wisenor said.
“It’s always, ‘who knew what, when?” he said.
Wisenor said he didn’t think most dealers would want to sell cars with issues, because it would hurt their reputation — and because most buyers take the car to get an inspection and would find out about the issues before purchasing, preventing dealers from making money.
“There’s a fine line between morality and legality in the used car world,” said Tommy Brignac, owner of used car dealership Elite Import Group.
He said he spends an average of $1,490 reconditioning vehicles and getting them ready for sale, so that customers don’t come back with issues after purchasing.
“You can’t sell cars under $15,000 and make money,” he said. “For people who sell cars for under $10,000, the average is lower because they don’t change the brakes, they don’t change the tires. They just need it to look good and sound good.”
Should the law be changed?
Nordgren says Louisiana’s civil code does allow for “redhibition,” a civil action that nullifies a sale if a defect “renders the thing useless, or its use so inconvenient that it must be presumed that a buyer would not have bought the thing had he known of the defect." The existence of such a defect gives a buyer the right to obtain rescission of the sale.
To qualify, the defect must have existed at the time of sale and must not have been apparent to the buyer. If the defect is noticed within three days of purchase, the law assumes it existed at the time of sale. If the seller knew about the defect and didn’t mention it, redhibition is available for one year from the date of discovery.
If the buyer can prove that the seller knew of the defect but sold the product anyway, the seller must pay attorney fees in addition to returning the purchase price and covering any damage from use of the vehicle.
But proving who knew what when is often impossible.
“The only way you can prove it is if it’s on the auction document. Or if they took it to get serviced and you have the record,” said Brignac.
Kirshner, Nordgren, and some others think the laws should be changed to put more responsibility on sellers.
While the Buyers Guide is mandatory nationwide, some states have their own, stricter laws. Twelve states — Connecticut, Kansas, Maine, Maryland, Massachusetts, Minnesota, Mississippi, New Jersey, New York, Rhode Island, Vermont, West Virginia — and the District of Columbia don’t allow “as is” sales for many used vehicles, according to the Federal Trade Commission.
Nordgren said that, while the Buyer’s Guide encourages consumers to get an independent inspection, many people purchasing a used car under $10,000 cannot afford an inspection. So they take the car as is and hope for the best. He said he thinks the law should be updated.
“The legislature needs to figure out a way to offer more protections. One thing they could do is say, ‘if a problem came up in a presumed amount of time, then bad faith is assumed’ A month or a week. That would encourage sellers to be more honest about the quality of products.”
Brignac agreed and said the more customers know about the law, the easier his job becomes.
For now, Nordgren, Brignac, and Wisenor urged customers to understand that “as is,” under the current law, means “as is,” and that they should get any car inspected before making a purchase.
“No matter how shady a dealer, if the customer takes precautions, they’ll be protected,” said Wisenor.
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