Industry update: Don’t overlook Lemon Law buybacks and title-brand obligations
California used-vehicle dealers face clear, enforceable duties when handling vehicles that were returned or repurchased under warranty laws. Whether you’re renewing a dealer license or training sales staff, refreshing procedures for Lemon Law buybacks, title-brand disclosures, and the Consumer Motor Vehicle Recovery Fund helps avoid regulatory action and protect buyers.
Why this matters now
Title brands (for example: Salvage, Lemon Law Buyback, Prior Taxi, Prior Police) follow a vehicle through later resale and must be disclosed to prospective buyers. Failing to disclose known branded titles or a vehicle’s significant prior use is treated as a material omission that can trigger DMV enforcement, civil penalties, and—even in willful cases—criminal exposure for licensees .
Manufacturer and DMV branding requirements
When a manufacturer reacquires a vehicle because it failed to conform to warranty (commonly called a Lemon Law buyback), the vehicle must be titled and registered in the manufacturer’s name and marked with the notation “LEMON LAW BUYBACK.” Manufacturers also must furnish and affix a decal to the vehicle (typically on the left-door frame) and provide written notice to the transferee describing the warranty defects and repair history. These procedures and DMV handling steps are described in the Vehicle Industry Registration Procedures Manual and related DMV guidance .
Dealer disclosure and titling obligations on resale
If you sell a vehicle that the manufacturer reacquired under consumer warranty law, the dealer must submit a disclosure statement with the titling documents. The disclosure may be on a REG 256 Statement of Facts, dealer letterhead, or a manufacturer invoice and must: identify the vehicle (year, make, model, VIN); state whether the title is marked “Lemon Law Buyback”; describe each nonconformity reported by the original buyer or lessee; and list repairs made to correct each issue. The buyer must sign this disclosure (signatures by power of attorney are not acceptable) before the registration application is submitted .
NMVTIS reports and prior-use disclosure
California law and DMV practice require dealers to obtain an NMVTIS (National Motor Vehicle Title Information System) vehicle history report for each used vehicle before sale and to disclose any branded title status (including Lemon Law Buyback) to buyers in writing. Dealers should also disclose known prior commercial or fleet use—such as taxi, police, rental, or fleet service—as these uses affect value and risk and must be revealed to prospective buyers .
Consumer Motor Vehicle Recovery Fund — what dealers should know
The Consumer Motor Vehicle Recovery Fund exists to help consumers recover losses arising from certain dealer conduct (see the Vehicle Code provisions describing the fund). Dealers should understand that unresolved consumer complaints that lead to final judgments or administrative actions can trigger claims involving this fund, and those outcomes may affect licensing enforcement and civil consequences under the Vehicle Code .
Practical compliance checklist for dealers (actionable items)
– Require an NMVTIS report for every used vehicle before sale and keep records of the report and disclosure provided to the buyer .
– For any vehicle known to be a Lemon Law buyback, include a signed disclosure (REG 256 or equivalent) with titling documents and ensure the buyer receives the written description of nonconformities and repairs .
– Post the required Buyer’s Guide and (where applicable) a red warning sticker next to it on vehicles with branded titles, and provide the NMVTIS report on request prior to sale .
– Train sales staff to identify and disclose prior commercial use (taxi, police, rental, fleet) and major non‑OEM modifications; document disclosures in writing and retain signed buyer acknowledgements .
– Maintain a written procedure for handling branded-title inventory, including how titles, REG forms, and statements of facts are stored and submitted to DMV, and periodically review those procedures during license renewal or staff onboarding .
Enforcement risk and penalties
Willful or repeated failure to disclose branded titles, misuse of dealer supplies, tampering with VINs, or mishandling disclosures can lead to DMV disciplinary actions—ranging from fines and license restrictions to suspension or revocation—and may expose dealers to civil claims and criminal penalties in severe cases. The DMV and prosecuting authorities treat deliberate misrepresentations and material omissions seriously, so robust documentation and consistent processes are prudent safeguards .
Next steps for dealers and compliance officers
Review your current used-vehicle intake and disclosure workflows. Update templates for buyer disclosure statements (REG 256 or equivalent), ensure NMVTIS checks are done and retained, and confirm that staff can identify branded titles and where to place required decals. If you train teams or prepare staff for the DMV dealer renewal exam, incorporate these points into your curriculum to reduce risk on the sales floor and in DMV audits .
Conclusion
Lemon Law buybacks, title brands, and the Consumer Motor Vehicle Recovery Fund are perennial compliance priorities for California dealers. Clear, signed disclosures, use of NMVTIS reports, and strict adherence to DMV titling procedures protect consumers and reduce regulatory risk. Make these requirements routine in your intake-to-sale workflow and include them in staff training and renewal preparation to maintain licensing compliance and customer trust.
