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J. Smith v. Casey Chevrolet, Circuit Court of Newport News, Virginia:
Posted on Jul 21, 2005Virginia has a statute called the “3% Rule,” which permits car dealers to sell vehicles that have been damaged and repaired, without having to disclose the damage and repair, if the retail cost of repair is less than 3% of the vehicle’s MSRP (Manufacturer’s Suggested Retail Price). In this case, in which Mr. Gayle is co-counsel for the Plaintiff, the Plaintiff bought a new Corvette, which he later discovered had been damaged prior to sale. When the Plaintiff confronted the dealer, Casey, it said the repairs were from “lot” damage, that they were minor, and that it did not have to tell him about them. Casey said the repairs cost less than $1,500, but the Plaintiff’s expert said the cost to repair the car properly would be over $5,000.00.
The court has ruled that the 3% Rule was not meant to allow car dealers to conceal any type of damage, such as “lot” damage, but only applies to pre-delivery factory damage or in-transit damage. Thus, Casey Chevrolet can not use the 3% Rule as a defense in this case unless the damage was from pre-delivery factory damage or in-transit damage. Car dealers in Virginia, and in other states that have similar rules, have been using this rule to conceal any damage done to new vehicles, whether from accidents in transit or on the lot. As is alleged in this case, sometimes a car dealer will make sure that the repairs it makes are half measures, keeping the cost under 3% of the “MSRP,” and then not mentioning anything to the new car buyer.