What car dealers need to know now about the new changes to the reversal of the burden of proof

by Christoph Adunka

Used car dealers must prepare for massive changes

New EU regulations completely change the trade in used cars and force  car sellers to act

Change in the legal situation

In the course of the implementation of the EU Sales of Goods Directive, used car dealers must prepare for new challenges from next year, which affect, among other things, the daily business. An adjustment to the reversal of the burden of proof means that the statutory warranty period will double from six to twelve months. Dealers thus carry in the future after the sale of a vehicle an entire year the burden of proof for defects. 

In addition, the warranty recently also includes digital content, for example, permanently mounted navigation systems. In addition, the directive specifies more transparency when concluding a contract and requires car sellers to disclose defects or a shortening of the statute of limitations for warranty services in a separate document.

Difference between warranty and guarantee

The so-called liability for material defects or warranty refers to the legal responsibility of the dealer to pay for defects or damages within the warranty period. Buyers have the right to repair these damages or compensation. If the repair has been carried out sloppily or is impossible, the buyer has the right to withdraw from the contract.

In principle, the buyer has the obligation to prove that the damage occurred before the contract was concluded, however, the legislator provides for the burden of proof to be shifted to the seller for a limited period after the purchase. Since it will be difficult in practice to prove that damage occurred only after the conclusion of the contract, the seller must usually pay for the damage in the end.

The situation is different with the warranty, which is granted voluntarily by the car dealer or manufacturer. This is excluded from legal requirements. Here, therefore, any warranty claims that go beyond the statutory warranty can be agreed.

Consequences for the used car market

For buyers and dealers, the change in the law from January 2022 has far-reaching consequences. For private purchases, the extended warranty increases buyer protection and provides more security when buying a used car. For the dealer, the ruling is less positive; This is from next year in the obligation to be able to prove for 12 months after the conclusion of the contract, that material defects or recently also defects in digital content at the time of purchase did not yet exist. 

Through these changes in the law, especially the sale of older used cars to private customers can become a minus business. It is therefore worthwhile to make the use decision for the used cars new and to sell older vehicles more often to dealers.

Where is the need for action for the dealer?

In order for the trade in used cars in 2022 to meet the new requirements under EU regulation, the dealer must consider a few things. With the entry into force of the new law, the seller is under an obligation to point out to the consumer before the conclusion of the contract in the purchase contract and a separate document, if there are deviations from the objective requirements of the vehicle. What sounds complicated at first means that all defects that deviate from a usual standard must be disclosed.

In addition, it was decided that the statute of limitations for material defect claims may continue to be shortened from two years to one year, but the dealer must inform the buyer of this in a separate document. Accordingly, car dealers should be sure to draw up such a document with immediate effect and have it signed every time a contract is concluded from the beginning of next year. Additionally the used car dealer must refer in this document to in the future lining up updates of digital contents (bspw. map data of the Navi).

In addition to changes of contract documents the used car dealer should recalculate before the background of rising used car prices also a part of its business. Representatives of the independent motor vehicle trade see in law change a threat to the market for older used cars. Accordingly, the dealer must weigh whether the sale of older vehicles to the end customer with the extended warranty is still profitable at all. 

How car dealers escape the new risks

A solution to the problems of dealers offers the sale to dealers. When trading between dealers, the warranty law does not apply, which is why you can sell vehicles so quickly and without risk. Especially if, as is the case with CarOnSale, fees do not apply until the sale is successful, selling to dealers is recommended. As a digital marketplace for used cars, CarOnSale offers dealers access to over 20,000 bidders across Europe. Selling via CarOnSale is easy, profitable and personal. In this way, CarOnSale offers dealers the opportunity to create new digital sales channels so that used car dealers can continue to run a successful business despite drastic new regulations.

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