Under the NAAA Arbitration Policy (effective June 1, 2025), a single mechanical defect only becomes arbitrable if it costs $800 or more to repair, and the buyer has a fixed window to file: sale day only for most in-lane sales, or 7 calendar days for online sales and some in-lane categories. Everything else in the policy, the sale-light system, the age and mileage cutoffs, the “not subject to arbitration” list, exists to answer one question before any of that matters: was the gap actually something the seller was required to disclose?
Most explanations of NAAA policy are written for the buyer’s side: how to spot an undisclosed defect, how to file a claim, how to win it. That’s the wrong entry point if you’re running remarketing or wholesale disposition. The policy questions that actually determine your arbitration loss rate live earlier, in the disclosure rules, the light system, and the exclusion list, not in the claims process itself.
Who adopts the NAAA arbitration policy?
Manheim, ADESA, and most independent auction houses use the NAAA policy as their baseline, then layer platform-specific addenda on top for things like local arbitration fee schedules or extended online return windows. That matters operationally: two lanes selling the same unit under the same NAAA framework can still have different practical outcomes if one auction’s addendum extends a time period or adds a category NAAA leaves as “auction choice.” Before you assume a claim is governed by the base policy, check whether the facilitating auction’s own rules modify it. The policy itself says as much: “arbitration time periods” and “vehicles with more than (auction choice) miles from time of sale” are explicitly left to each auction to set within the NAAA framework, per the NAAA Arbitration Policy, effective June 1, 2025.
The sale light decides more than the announcement does
NAAA runs a four-light system, and which light a vehicle sells under changes what’s even eligible for arbitration, independent of what got announced verbally.
| Light | Meaning | What it means for arbitration |
|---|---|---|
| Green (Ride and Drive) | Vehicle is guaranteed under the full policy | Any defect requiring disclosure that wasn’t announced is fair game for a claim |
| Yellow (Limited Guarantee) | Auctioneer or selling representative made qualifying announcements | Arbitration is limited on those specific points; can stand alone or pair with green |
| Red (Limited As-Is) | Sold as-is per the dollar amount, model years, and mileage set by local auction policy | Only qualifies under those specific as-is limits; most of what’s arbitrable under green isn’t under red |
| Blue (Title Attached/Unavailable/Absent) | Announces the title isn’t present at time of sale | Skipping this announcement where it applies opens the vehicle to arbitration for no title |
Key insight
The light is a binding representation of condition, the same as the condition report itself. Selling a unit under the wrong light, or under green when a yellow-qualifying issue exists, is a bigger risk exposure than a slightly imperfect verbal announcement, because arbitration eligibility is scored against the light and the appendix category, not just against what the auctioneer said in the lane.
What role does the condition report play in an arbitration claim?
The condition report is the sole basis dealers use to bid, since most buyers never see the vehicle in person before the sale. Under NAAA policy, the seller is responsible for “the accuracy and completeness of all representations or descriptions,” which explicitly includes the condition report written by or on behalf of the seller. Any inconsistency between what the report says and what the vehicle actually is becomes the substance of the claim. This is the mechanism that makes condition report accuracy a direct line item on your arbitration loss rate, not a soft quality metric. A detailed look at what actually drives condition report accuracy is worth reading alongside this one if inspection consistency is your bigger problem than policy literacy.
Three carve-outs that decide disclosability before you get to the claim
This is the part most seller-side explainers skip, and it’s the part that actually moves your loss rate. A defect existing isn’t enough to make it arbitrable. NAAA policy excludes entire categories outright:
- Wearable and inherent items. Tires, wipers, brake pads and shoes, hoses, belts, bulbs, filters, shocks, and struts are not arbitrable when normally worn, only when “excessively worn or inoperative,” and manufacturer warranty guidance is used to judge what’s inherent to the model. An oil leak that isn’t actively dripping and visible on inspection isn’t arbitrable either.
- Age and mileage cutoffs. Vehicles over 20 model years are sold as-is by default unless the seller represents otherwise. Vehicle accessories (navigation systems, sunroofs, heated seats, entertainment systems) on vehicles more than 4 calendar years old aren’t subject to arbitration at all. Trailers, RVs, watercraft, and motorcycles over 10 model years fall outside the policy entirely.
- Report-only claims. A buyer cannot arbitrate based solely on an Electronic Data Vehicle History report (Carfax, AutoCheck, NMVTIS). The auction and seller are not bound by what those services show; the facilitating auction may investigate further, but a bare EDVH flag isn’t a valid claim on its own.
If you’re building a seller-side checklist for what to fight versus what to eat, this list is the actual filter, not the general “was it disclosed” question buyers’ guides focus on. A related read on odometer discrepancy liability walks through one of the categories that does NOT get this carve-out treatment, since odometer and title-brand issues sit in the strict-disclosure bucket regardless of age or wear status.
The clock starts the moment the vehicle sells, and it only runs once
Sale day counts as Day 1 for every timeline in the policy. Most in-lane defect claims must be filed sale day only; a smaller set of in-lane categories and all online sales get 7 calendar days, which NAAA sets as the industry-minimum standard for online. That 7-day window is where structural damage and a malfunctioning (inoperative) odometer actually sit per Appendix I, not the longer history track sellers sometimes assume. The 30-day window is reserved for a narrower set: stolen vehicle/theft recovery, mileage that doesn’t match actual miles (rollback or unknown true mileage), and prior salvage or bonded-title history. Flood damage caught by auction inspection gets 30 days too, while flood history that only surfaces later through government or insurance records gets 120 days, because that kind of record often lands well after the sale.
One structural protection for sellers: a buyer gets exactly one chance at a mechanical arbitration per vehicle transaction. The arbitrator inspects only the specific defect named in that initial claim, not the whole vehicle. That doesn’t block a separate, later history-based claim (odometer, salvage, theft) under its own timeline, but it does mean a buyer can’t keep reopening the same mechanical dispute with new complaints once the first claim is decided.
Who actually decides a claim, and what a loss costs
The “neutral arbitrator” language buyers hear obscures a detail sellers should know: it’s auction management that makes the binding decision on both parties, per the policy’s own language. There’s no external tribunal. That’s part of why peer reputation among buyers matters so much in this industry; the process is run inside the same auction relationship both sides depend on repeatedly.
If a claim succeeds, the seller owes reimbursement for the buyer’s reasonable, documented expenses, excluding profit, commissions, and detail charges, calculated at auction (wholesale) repair cost rather than retail. That reimbursement is explicitly at the auction’s discretion. Sellers also don’t get paid for a unit still in arbitration, and if payment already went out before a claim resolves against the seller, the policy requires the seller to return it. For a remarketing desk managing recovery rate against MMR, that payment hold is often the more immediate operational pain than the reimbursement dollar amount itself. If arbitration loss rate is climbing broadly rather than concentrated on one defect category, the complete prevention playbook is the better starting point than this policy walkthrough, since it covers process fixes across intake, inspection, and listing rather than the policy mechanics alone.
FAQ
Who adopts the NAAA arbitration policy? Manheim, ADESA, and most independent auction houses use it as a baseline standard, sometimes layering platform-specific addenda on top for fee schedules, extended windows, or local mileage and as-is thresholds the base policy leaves as “auction choice.” Because those categories are explicitly left open, the same defect can be arbitrable on one platform and not another even though both run on the NAAA framework.
What role does the condition report play in an arbitration claim? It’s the sole basis dealers use to bid, since most buyers never inspect the vehicle before sale, so any inconsistency between the report and the vehicle’s actual condition becomes the substance of a claim against the seller. NAAA policy treats the condition report as a binding representation, the same status as the sale light itself.
Where this fits operationally
None of this replaces reading the actual policy PDF and your facilitating auction’s local addendum before a unit goes live, particularly for structural damage and flood history, where the disclosure thresholds are detailed enough that a quick skim misses them. But the pattern holds across categories: before you fight or concede a claim, check whether the defect falls inside a listed disclosure category, inside the time window, and above the dollar threshold. Most of what looks like an unfair arbitration loss is actually a gap that was disclosable under the policy the whole time, and catching that earlier in the inspection-to-listing pipeline is where a second layer of verification before a unit goes live tends to pay for itself faster than fighting claims after the fact.