BMW purchasers have filed a class action in federal court in Newark, N.J., alleging the car maker sells demonstration vehicles to customers who think they are getting new cars.
Because BMW starts warranties on demos as of the date dealers buy them, the purchasers receive shortened periods of coverage, the plaintiffs allege in Saini v. BMW of North America, 12-cv-6105.
The putative class is comprised of people nationwide who bought a BMW demo vehicle identified in the sales contract as new within the past six years.
The complaint asserts claims for breach of contract, unjust enrichment and violation of the New Jersey Consumer Fraud Act, for which treble damages and legal fees are sought.
Named plaintiff Sanjay Saini, of Vienna, Va., alleges that he bought a 2011 BMW 335d from BMW of Sterling in Sterling, Va., assuming he was getting a new vehicle that would come with the promised four years of “Ultimate Warranty Coverage.”
But he claims that when he brought his car in for service under the warranty, he learned it would not last as long as expected, having started earlier because the car was a demo.
The warranty plan covers maintenance costs and lasts for four years or 50,000 miles, whichever comes first. The protection starts either on the date of first retail sale, or the date the vehicle is placed in service as a demo or for another purpose, whichever is earlier.
Thus, when a buyer buys a demo, thinking it is new, part of the warranty period has elapsed and is less than the promised four years.
It can be hard for consumers to tell they are buying a demo if it has not been used for test drives, and, even if it has, it might not be apparent if it has not been driven much, alleges Saini.
The shortened warranty problem is allegedly exacerbated because BMWs are “notoriously expensive to maintain and repair,” he continues.
As a result, the “truncated BMW Ultimate Warranty causes Class members to improperly incur costly regular maintenance and service costs, as well as repair and roadside service costs that would otherwise be the responsibility of the BMW under the Ultimate Warranty, resulting from BMW’s concealment that Class members’ cars were sold to dealerships as demo vehicles,” states the complaint.
To make things worse, BMW has allegedly created incentives for dealers to sell demo vehicles as new by selling demos to them at discounted prices.
The complaint refers to a one-day, end-of-the-month sale this past July, in which dealers could buy demo vehicles at markdowns of up to $7,000, as an example of the incentives. In that way, Saini says, BMW got to book the transactions as sales while dealers could put the vehicles on their lots as new cars.
Saini alleges that the Woodcliff Lake company has a policy of directing dealerships to sell demos as new cars, in violation of a Federal Trade Commission rule requiring car companies to disclose that a vehicle is a demo.
The complaint refers to an Aug. 15, 2012, article in The Wall Street Journal, “BMW’s ‘Demo’ Sales Boost Results,” which depicts July’s one-day discounts on demos as a way to pump up sales figures and credits it with helping BMW beat rival luxury car maker Mercedes-Benz that month. BMW claimed sales of 21,297 cars for July, ahead of Mercedes’ 19,312.
The complaint quotes a portion of the article stating that “managers who own or oversee more than a dozen BMW dealerships said they routinely offer the [demo] vehicles as new and that BMW’s U.S. sales unit approves of the practice.”
It also refers to Internet bulletin boards and chat rooms as being “replete with complaints about BMW not honoring the full term of Ultimate Warranty coverage for undisclosed demo vehicles sold as new.”
BMW of North America spokesman Kenn Sparks declines to comment on the litigation. He says he is unaware of any other suit making similar allegations against the company.
Saini’s lawyers, Bruce Greenberg of Lite DePalma Greenberg in Newark and Jeffrey Krinsk of Finkelstein & Krinsk in San Diego, did not return calls.
The matter has been assigned to District Judge Claire Cecchi and Magistrate Judge Joseph Dickson.
At least two class-action suits are pending in the district that allege defects in BMW’s run-flat tires, which allow them to run for up to 150 miles after a puncture.
A class was certified in Marcus v. BMW of North America, 08-cv-05859, but the U.S. Court of Appeals for the Third Circuit reversed on Aug. 7.
BMW and its co-defendant in both tire cases, Bridgestone Americas Tire Operations, have asked for dismissal of the other action, Greene v. BMW of North America, 11-cv-4220, on the ground that the precedential Third Circuit decision in Marcus makes it impossible to certify most of the claims in Greene.