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Not true especially if sold by a dealer or expressly sold ''as is'' . There is the implied warranty and the Moss warranty act, which are federal laws and could apply. A quick search also shows in Pa used cars are not covered by STATE lemon laws unless the vehicle is still under manufacturers warranty, which this car is.
Warrantees are also time based so not necessarily especially if the car was produced early 2012 or late 2011. In any event, this car should fall under "power train warranty" unless the "limp mode" is electronically controlled by the ECM. The biggest culprit for this is mostly electrical. Then it would not necessarily be covered if VW has a 3 yr/36K B to B warranty.. You could have a bad coil or a bad throttle position sensor or worse, a bad wiring harness. I'd wait to see what the dealer is going to do for you before i wrote the car off. No harm in asking for an "inconvenience" suffering perk. Again, it will depend on what the dealer has into it. VW makes some nice stuff and more than likely, this problem popped up before. The car is very young for an auction purchase and may be some type of "buy back". Where he got the car will tell volumes especially if it is a salvage or flood car. I would ask for a "Car Fax" as my "perk" before I re-drove this car off his lot.
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