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Bought a lemon car? Here’s who you should call

Published January 25, 2013

It rolls off the tongue like molasses and isn’t nearly as memorable as “lemon law.”

The Canadian Motor Vehicle Arbitration Plan (CAMVAP) is Canada’s answer to U.S. legislation that awards consumers compensation when their vehicles fall apart.

Disputes about alleged defects in a vehicle’s assembly or implementation of the new-vehicle warranty are eligible for arbitration under CAMVAP. Because it’s a dispute-resolution process, it has some distinct advantages.

It is free to use and relatively speedy — most cases are resolved within 70 days of application — and, unlike U.S. lemon laws, it doesn’t employ armies of lawyers. It offers reasonably effective recourse, even for buyers of late-model used vehicles.

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CAMVAP is national in scope, ensuring every Canadian has access to the same remedies, while the U.S. lemon laws vary from state to state, with some weaker than others.

Many more Canadians are eligible for a hearing, as long as the vehicle is no more than five model years old and has travelled fewer than 160,000 km. The U.S. eligibility limit is generally three years and 50,000 km.

“Eligibility is easier in Canada. There’s no three-attempts-at-a-repair or 30-days-in the-shop stipulations before a vehicle owner can seek restitution, which are common requirements in the U.S.,” says Bob Pierce, the former provincial motor vehicle registrar who helped establish CAMVAP in 1994.

“It was the NDP government of the day that recognized Ontario consumers needed a lemon law. MPP Peter Kormos threatened to write one, but the automobile manufacturers came back with a national arbitration process modelled after Ontario’s OMVAP process.”

Recognizing that U.S.-style lemon laws would cost provincial treasuries millions of dollars annually, Pierce says the industry-run plan was granted nationwide approval to “save the administrative burden.”

“American lemon laws are bureaucratic, take lots of time and cost taxpayers and consumers alike,” he says. Automakers gird for battle with immense legal departments in the U.S., and consumers likewise show up with their own lawyers, generating big legal bills.

By contrast, the cost of dispute resolution in Canada is more manageable and is borne entirely by the automakers. It is estimated the program’s expenses add little more than $1 to the price of each new vehicle.

CAMVAP general manager Stephen Moody refutes the perception that arbitrators may be biased in favour of the manufacturers who are paying for the process.

“Some 75 to 80 per cent of the arbitrators are private lawyers, with the balance made up of engineers and other professionals, who have chosen arbitration as a tool in their portfolio. Manufacturers have no say in their selection.”

CAMVAP is guided by an independent board of governors that includes consumer, government, dealer and manufacturer representatives. In order to use the arbitration process, which is binding (no appeals), consumers have to relinquish the option of pursuing civil action in court.

Automobile owners are invited to apply for arbitration anytime within the stipulated time and mileage period. Hearings take place in the complainant’s hometown. And lawyers are deemed unnecessary.

“We see only two or three lawyers a year at hearings,” says Moody. CAMVAP averages about 300 hearings across the country each year.

The pro-consumer Automobile Protection Association (apa.ca) suggests vehicle owners are better served by bringing an expert witness, such as an auto technician, who can identify faulty parts inside a failing transmission, for example.

“Many complaints settle when the consumer is backed up by an expert and is well-prepared,” says APA president George Iny. Moody concurs.

“We recommend bringing a friend or a witness — and bring the vehicle with you. Arbitrators typically will take the vehicle out for a short drive; it’s a great opportunity to demonstrate the problem,” says Moody.

CAMVAP limits the kinds of reimbursements that consumers can receive. It can’t refund expenses related to buying or leasing a vehicle, or award punitive damages — a big reason why arbitration remains more affordable than a lawsuit.

Iny says many consumers elect arbitration, expecting that their problematic vehicle will be bought back by the manufacturer. But it often doesn’t turn out that way.

“CAMVAP is a very good place to get a refund for the car repairs your manufacturer should have paid,” says Iny. “It’s not nearly as effective for getting rid of a bad vehicle.”

In a study of CAMVAP award statistics covering 2009 and 2010, the APA noted the success rate for consumers was 61 per cent. But 54 per cent of consent awards and 21 per cent of arbitrated cases were ordered back to the dealer for yet another repair. For some vehicle owners, it’s a less than satisfactory outcome.

Only 12 per cent of arbitrated cases resulted in a purchase refund, minus an allowance for vehicle use. The APA suggests arbitrators need guidelines for identifying just how bad a vehicle has to be before replacement is required (every U.S. state lemon law does so).

Moody contends many applicants are not intent on getting their money back; they just want their vehicle repaired properly.

“A lot of consumers don’t apply for a buyback. It may not be in their interest or their ability to buy a new car after the use-of-vehicle cost has been deducted,” explains Moody.

Iny says that’s because of the punitive manner in which CAMVAP calculates vehicle depreciation, based on a lifespan of 160,000 km. He says that undervaluing the vehicle’s life by half, since today’s vehicles are expected to run 320,000 km before being scrapped.

“CAMVAP is a risky proposition if you want to return your bad vehicle,” says Iny. “The likelihood of that happening is about one in eight arbitrations, overall, and varies greatly depending on the brand of vehicle.”

In its analysis of arbitration award statistics posted online at camvap.ca, the APA identified which manufacturers appeared most often at hearings. (In its defence, CAMVAP states the collected data has no statistical validity.)

Almost one-third of arbitration cases in 2009-’10 involved Chrysler vehicles, including Dodge, Jeep and Ram models. With only 13 per cent market share in Canada at the time, Chrysler was overrepresented in hearings, while Ford and General Motors had representations more in line with their market shares.

Chrysler was ordered to buy back its vehicles about 40 per cent of the time that year, higher than any other manufacturer. Among importers, Nissan was also overrepresented and it was ordered to buy back its vehicles 28 per cent of the time.

BMW, Mitsubishi and Suzuki are not participating in CAMVAP, so owners of their vehicles must wrangle with dealers or elect to go to court.

Successful arbitration is more elusive for buyers of used vehicles. A defect claim on a used car often raises the spectre of neglected maintenance or abuse by the previous owner — a charge manufacturers are quick to raise. The second owner would be wise to bring an expert witness.

“The expert would have to mention the design issues that caused the failure and rule out abuse by the previous owner,” advises Iny.

What’s most striking about Canada’s arbitration process is the minuscule number of cases brought forward by consumers — out of the 6 million vehicles eligible at any given time.

Moody says the caseload peaked six years ago at 715 hearings, and the annual tally has been sliding ever since. There were only 283 cases in 2011.

“It’s indicative of the rising quality of today’s vehicles,” Moody says. He adds a lot of settlements are hammered out prior to hearings being scheduled, suggesting CAMVAP functions as an effective incentive for manufacturers to resolve disputes.

Moody says the industry is working hard to raise public awareness of the program. Every new- and used-vehicle sales contract informs buyers about CAMVAP, as do owners’ manuals.

Still, says Moody, it’s a challenge to get shoppers’ attention: “We found that when we attend auto shows, it’s extremely hard to get consumers to talk to us.”

Iny agrees significant improvement in vehicle quality and warranties have reduced demand for the program. But he says CAMVAP’s limitations are well known, too.

“CAMVAP has done a reasonable job promoting what it has to offer. If the program was an effective way to get rid of your bad car, word-of-mouth would have done the job and CAMVAP would be oversubscribed.”

wheels@thestar.ca

Unhappy index

Here’s how the major automakers ranked in terms of total market share and their percentage of CAMVAP arbitration hearings with owners in 2010.

Chrysler: 13.1 per cent of market share, 32 per cent of arbitration cases

Ford: 17.2, 15

General Motors: 15.8, 14

Nissan: 5.3, 8

Toyota: 11, 6

Honda: 9.1, 5

Kia: 3.5, 4

Hyundai: 7.6, 3

Mazda: 5.1, 3

Volkswagen: 4, 3

Source: Automobile Protection Association

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