The various definitions of new and used vehicles can cause confusion for dealers when determining whether a Damage Disclosure Notice is required.

Defining New Vehicles
The New Motor Vehicle Damage Disclosure Act (Disclosure Act) defines a new vehicle as one which, regardless of mileage, has never been registered or titled to an ultimate purchaser or which has not been sold or bargained to or exchanged with an ultimate purchaser or which has not been given away.

For new vehicles, the damage disclosure law requires a dealer to disclose damage if the amount is over $500 or 3% of the MSRP, whichever is greater. If the damage is over the $500 or 3% of the MSRP threshold, the dealer is required to give a disclosure form to the customer disclosing the nature of the damages, whether they are covered by the manufacturer’s warranty, and if they affect the manufacturer’s warranty. Damage is defined as any physical harm sustained or incurred by a new vehicle, whether repaired or replaced.

This disclosure must be made whether the customer asks about damage repairs or not. When a customer inquires about the existence of damage repairs made, the dealer cannot misrepresent or mislead the customer by stating that the vehicle has not been damaged, even if the damage repairs are under the threshold disclosure amount.

Defining Used Vehicles
Under the Attorney General’s Regulations, a vehicle is considered “used” if it has been sold, bargained, exchanged, or given away; which has had the title transferred from the person who first acquired it from the manufacturer or dealer; or which has 500 or more miles recorded on the odometer (excluding mileage incurred in delivery or in transport from a
manufacturer or another dealer).

Demonstrator Vehicles
The occasion could arise where a vehicle is considered “used” based on the Attorney General’s Regulations, when the vehicle has 500 or more miles recorded on the odometer; however, is considered a “new vehicle” under the Disclosure Act because it has never been registered or titled to an ultimate purchaser.

In this instance, because the Disclosure Act requires a damage disclosure notice to be issued on a vehicle, regardless of mileage, that has never been titled or registered to an ultimate purchaser, a new vehicle damage disclosure notice may be required on a vehicle with 500 or more miles recorded on the odometer that is being sold by the dealership
as “used”.

Used Vehicle As-Is Disclosure
The Attorney General’s regulations require that a dealer not mislead, obscure or misrepresent the quality or grade of a used vehicle to a customer. In addition, damage involving the following six items are required to be disclosed in writing for any roadworthy vehicle being offered for sale:
1. frame is bent, cracked or twisted;
2. engine block or head is cracked;
3. vehicle is unable to pass state inspection (even if the vehicle’s inspection sticker is still valid);
4. transmission is damaged, defective or so deteriorated as to require replacement;
5. differential is damaged, defective, or so deteriorated as to require replacement; or
6. vehicle is flood damaged.

Vehicles are required to be evaluated for these conditions:
• not more than 30 days after the motor vehicle comes into the inventory; and
• if the vehicle accumulates 500 miles or more while in inventory, the vehicle must be checked
again within 30 days prior to sale.

The used vehicle damage disclosure form should be as complete as possible and should be initialed by the buyer. A copy should be supplied to the buyer and another copy should be placed in the dealer’s file.

Disclosure Forms
New Vehicle Damage Disclosure forms are available for purchase from Reynolds & Reynolds. Used Vehicle damage disclosure notices are available at https://www.paadps.com/usedvehicledamagedisclosureform.aspx.