Lemon Law

 Buyback Settlement Explained

Lemon Law Buyback Settlement Explained

Under California Lemon Law, owners of defective “lemon” vehicles may receive compensation from the vehicle manufacturer either through a court ruling or by way of an out-of-court settlement. The three most common settlement outcomes are:

  • Vehicle Buyback or Repurchase
  • Vehicle Replacement
  • Cash & Keep Settlemen

Lemon Law Buyback Explained

As implied by the name, a Vehicle Buyback settlement in California happens when the manufacturer pays the vehicle owner the full purchase price of the vehicle, subject to certain deductions allowed by law, and takes back possession of the defective unit. The buyback amount will cover the following:

  • Vehicle purchase price. This includes the down payment and all monthly installment payments you’ve made up until the date of the settlement.
  • Purchase transaction expenses. This includes all out-of-pocket expenses you were charged at the time of purchase such as financing charges, processing fees, vehicle registration, servicing fees, and warranty fees.
  • Expenses incurred as a direct result of the vehicle’s reported defects. This includes towing fees, cab expenses, public transport expenses, car rental expenses, etc.
  • Repair costs. If you were charged for parts and/or services at the dealership or authorized repair shop when you brought in the vehicle for repairs, the manufacturer will have to cover those costs, as well. 
  • Outstanding financing payments. If the vehicle was obtained through third party financing, the manufacturer will cover the cost of the remaining amortization payments to fully pay the car loan. 
  • Legal expenses. Under this settlement, the manufacturer is also responsible for the payment of all attorney fees and other legal and court filing expenses. 

Legally Allowed Deductions From for the Buyback Amount

In California, the manufacturer is allowed to deduct a minimal amount from the buyback payment as compensation for your use of the vehicle during the period before the problem was detected and brought to their attention.  

This deduction, known as Mileage Offset, is based on the mileage registered in the vehicle’s odometer at the time when you first brought the vehicle back to the dealership for repairs. 

The deductible amount is arrived at by multiplying the mileage with the purchase price of the vehicle and then dividing the result by 120,000. To illustrate, if vehicle’s mileage is at 16,000 and you bought the vehicle for $35,000, the computation for Mileage Offset will be as follows:

    16,000 (mileage)  x 35,000 (purchase price) / 120,000

    = $4,667 (allowed deduction from buyback amount)

Hiring a Lemon Law Attorney is Essential

If you’re thinking of filing a Lemon Law claim, you should retain the services of an experienced lemon law attorney as early as possible in the process. Having competent counsel is a huge advantage and can immensely boost your chances of success. The legal landscape for claims in California is too nuanced and complicated for the layman to navigate and without a skilled lawyer who can guide you through the process, you’re liable to get bogged down by the steps and requirements and end up losing your case.

Who pays for the attorney’s fees?

The car manufacturer does. In California, if your claim is successful, the manufacturer is required to cover the cost of attorney fees and other legal expenses. 

You need not shell out a dime from your own pocket for legal expenses as most lawyers work on a contingency basis when they take on a Lemon Law claim. This means that they will only get paid if they win the case. The payment of their fees is legally provided for in the final claims settlement.