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INTERIM REPORT ON NEW CAR WARRANTIES
TO THE
SIXTH LEGISLATURE OF THE
STATE OF HAWAII
REGULAR SESSION OF 1971
by
Richard F. Kahle, Jr.
Assistant Researcher
Request No. B-7786 Legislative Reference Bureau
December 1970 University of Hawaii
INTERIM REPORT ON NEW CAR WARRANTIES
Present automobile warranties run directly from the manu-
facturer to the new car purchaser. It is the dealer's responsi-
bility, however, to replace defective parts covered by the
warranty, and then to bill the manufacturer for the parts and
labor utilized. The warranty given by the new car manufacturers
is in lieu of all other warranties, express or implied, including
warranties of merchantability or fitness for a particular pur-
l
pose. Usually excluded from the warranty are tires, which are
guaranteed separately by the tire manufacturer, and parts and
labor which are considered to be part of the normal maintenance.
Since 1931 and until late in 1960 the new car warranty had
remained standard for all manufacturers, i.e., cars were guaranteed
for 90 days or 4,000 miles, whichever came first. During 1960,
however, the nation was in a general recession and new car sales
had started to decline. Longer warranty periods were offered
by the new car manufacturers to cope with the declining sales.
By 1962, sales had substantially recovered for-new cars and the
next eight years saw the new car manufacturers maneuvering for
advantageous positions in regard to sales and warranty offerings.
The 1962 warranty was for 12 months or 12,000 miles, whichever
came first. The longer warranty period required the new car
dealers to provide more service and repair to their customers.
lA warranty of merchantability states that the goods are
reasonably fit for the general purpose for which they are sold,
while a warranty of fitness represents that the goods are suit-
able for the special purposes of the buyer. Uniform Commercial
Code, sections 490:2-314 and 490:2-315.
It appears that this warranty extension has led to the present
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consumer dissatisfaction with warranty service.
Preliminary data indicate that the warranty service problem
is national in scope. Reports from the Federal Trade Commission
and information from other states indicate that Hawaii is not
the first to consider the warranty service problem. Other
states have already moved in this area by the enactment of legis-
lation.
The tables listed below were taken from the 1968 Federal
Trade Commission Report on Automobile Warranties and the April
1969 and 1970 issues of Consumer Reports, published by Consumer
Union. The breakdown for the 1967 cars is not presently avail-
able, although the figures indicated by Consumer Union were
similar to those for 1966. The Consumer Union survey covered
between 40,000 and 50,000 car owners for each year in the survey.
2Federal Trade Commission, Staff Report on Automobile
Warranties (Washington, D.C.: 1968), pp. 30-52.
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Table 1
Answers to Question: "Was the new car in a satisfactory
condition when delivered?"
General Rambler
Motors Chrysler Ford (American Motors) Average
1968 Cars
% Yes 67,0 63,0 66.0 67.0 65.7
% No 33,0 37.0 34.0 33.0 34.3
1967 Cars Approximately 1/3 of the cars were in unsatisfactory
condition when delivered
1966 Cars
% Yes 62.5 63.4 68.8 64.2
% No 37.5 36.6 31. 2 35.8
1965 Cars
% Yes 63.6 63.5 62.1 61.5
% No 36,4 36.5 37.9 38.5
1964 Cars
/0 Yes 6303 68.5 68.7
% No 36.7 31. 5 31. 3
1963 Cars
% Yes 67.2 70,0 63.8 69.3
% No 32.8 30.0 36,2 30.7
The figures for Table 2 are for the 1963 through 1966 car
model years and are based on answers to additional questions
that were asked of those who answered the question in Table 1.
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Table 2
Answers to Question: "Was warranty work performed satisfactorily?tf
General Rambler
Motors Chrysler Ford (~~ericanMotor§..) Total
---
1966 Cars
% Yes 7609 8204 8L3 83,8 79,9
10 No 23,1 17 ,6 18, 7 16.2 20,1
Total 3,921 2,653 2,461 315 9,350
1965 Cars
% Yes 70,1 77 ,6 77,4 78,1 74.2
10 No 29.9 22,4 22 6 21,9 25,8
Total 6,452 3,408 3,543 885 14,288
1964 Cars
% Yes 7L5 80,7 76,4 76.0 74,6
% No 28,S 19,3 23,6 24,0 25.4
Total 5,730 2,079 2,161 834 10,804
1963 Cars
% Yes 69,S 77 ,4 75,2 72,9 72.5
% No 30,5 22,6 24,8 27,1 27 ,5
Total 3,998 1,443 1,784 893 8,118
These tables indicate that one-third of the consumers
purchasing cars each year are dissatisfied with the condition
of the new car they received. Of those taking their new cars
to the dealer for warranty service. approximately one-fourth
are not satisfied for various reasons with the warranty work
performed.
As of January 1968, the Federal Trade Commission had
received some 3,000 complaints regarding warranties. This has
been one of the largest volume of letters received by the
Commission regarding a single topic in the field of consumer
complaints since the Commission was established in 1914.
The magnitude of the new car warranty problem in Hawaii
has not yet been determined. A preliminary check with the
Motor Vehicle I~dustry Licensing Board indicates that it has
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received very few complaints concerning new car warranties
since the Board was placed in the Department of Regulato ry
Agencies in 1969. This low rate of complaints may be due to
the fact that the public is unaware of the Board 's existenc e
and purpose. The Office o f the Consumer protector has
received thirty warranty r elated complaints during the period
July 1969 to November 1970.
In preparation for the fina l report to be submitted to
the 1972 Legislature, research will be made by the Bureau to
determine the extent of the warranty problem as it eixsts in
the State of Hawaii. A survey will be made of new car dealers
in the State to determine the kinds of warranties being offered
to the consumer, and the types of warranty repair practices
being offered by dealers. The Bureau will continue its research
and study on the remedies that are being proposed at the national
and state levels to solve the warranty problem. The final
report will contain information on national and state endeavors
to further consumer satisfaction and benefit from new car
warranties. Also included in the final report will be a dis-
cussion of the legal issues involved in new car warranties and
possible legislation for consideration by the legislature.
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