What does the buyout of the lemon law mean?
A lemon law buyout is one of the possible outcomes that you may experience if you buy a car that is considered a lemon – one with significant and unsolvable problems. This could be considered the most successful outcome of a lemon law case, where the manufacturer reimburses you for all vehicle costs. Let’s take a closer look.
Lemon Law Buyout
Lemon laws exist in one form or another in all 50 states of the United States, but they can vary widely, so the outcome of these cases varies as well. Perhaps the most desired outcome of a lemon law case is a buyout. In this case, an automaker buys back the car that was considered a lemon, offering you a full refund.
Lemon Law buyouts typically reimburse you for the following costs:
- Your deposit
- All monthly payments made
- Financial expenses
- Prorated registration fees
- Costs of service contracts
- Rental and towing costs
- Full loan repayment
If you’ve bought a vehicle that has gone awry, recovering all of the costs associated with your car can go a long way in helping you settle into a new, working vehicle. However, since states vary, you may not be eligible for a full buyback.
A manufacturer may choose other options, and they may not have the best result for you as a consumer.
Other results of the Lemon Law case
If you do not get a buyout from your lemon law case, it is possible to receive a replacement car. It should be “substantially identical” to the lemon car and in its condition when you purchased it (without its lemon blemishes). This means you will not receive a Mustang to replace your Focus – sorry!
In some cases, you can get a buyback for a partial cost – the purchase price of your lemon, minus the value of the car when you drove it before it ran into problems. This is called mileage compensation, where the manufacturer has the right to deduct an amount from your refund for the time you have driven the car without a problem.
To calculate a mileage offset that could affect your buyback, multiply the purchase price of the car by the mileage at the time of the first warranty repair for the problem that caused the lemon designation. Then divide that amount by 120,000.
For example: If you buy a vehicle that costs $ 25,000 and have paid for it for a 5,000 mile warranty issue, the mileage compensated for your car is $ 1,041.67. This means that you get back $ 23,958.33 from the automaker ((25,000 x 500) / 120,000 = 1,041.67).
In rare cases, some car manufacturers attempt to reimburse you for only the equity in the vehicle. This means that you might still have to pay back the loan amount that exceeds the value of the car (negative equity). The worst part of all of this is that while you still owe your lender, the builder gets the car, which leaves you paying for something you don’t have.
Finally, some manufacturers may attempt to submit you to arbitration, where they tell you they want to settle out of court, often saying it’s faster. You should avoid this at all costs. Automakers generally have a lot more resources to use in this kind of situation than an individual, which can put you at a disadvantage.
What happens after the redemption?
Once a lemon is repurchased by the manufacturer, the car is usually given a brand title stating that it is a lemon or a salvage vehicle. A few states are more specific and mark these vehicles as manufacturer buyback. In order for lemon title cars to be driven legally, they must be completely repaired and inspected to be deemed appropriate. It is important to know all the names of lemon in your area so that you can avoid them in the future when buying a used vehicle.
What is considered a lemon?
To be considered a lemon, a car must have a substantial defect which affects the operation, safety or value of the vehicle, which occurs within a certain period of time or a certain number of kilometers after purchase. The defect must be covered by a warranty and remain unrepaired after a reasonable number of attempts. The number of attempts considered reasonable varies by state, but it usually depends on the problem.
As a general rule, lemons should meet these repair attempt qualifications:
- Serious security concerns: an attempt
- Minor problems: three or four attempts
- Vehicle spent 30 days or more in the workshop within a year
Also, for a car to qualify as a lemon, the problems usually have to first occur within a year or two and / or 12,000 to 24,000 miles. These standards vary by manufacturer and state. Lemons are generally new cars, but in some cases used cars are also eligible.
Need another vehicle?
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