Lemon laws exist at the federal level, and many states have their own version of it. State laws tend to be stricter than the federal rules. Car warranties and the related rules can act as lemon laws, as well, as long as the vehicle’s issues fall under the warranty. In many cases, the car has to be repaired within four attempts or within a month of sitting in the dealer’s repair shop. If the dealer can’t repair the vehicle to eliminate the substantial issues the car has, they have to make things right with the customer.
The Dealer’s Options Under Lemon Laws
One solution the dealer has is offering a comparable replacement vehicle. If the car needs work under the manufacturer’s warranty that may take a few months, they may offer the exact same make and model as long as it has had the issue fixed. In the case of used cars or uncommon makes and models, the dealer may not have an exact replacement on hand. In these cases, the dealer may be required to buy back the vehicle. You can use a lemon law buyback calculator to get a rough estimate of the buyback offer.
What factors go into the buyback offer? The first factor is how much money you’ve already sunk into the vehicle. For example, if you’ve only made the down payment and first car payment, they only owe you that much back. They won’t pay you 15,000 dollars for a car that you only have 5,000 dollars of equity in; to do that would invite fraud. Note that you’re probably obligated to make the car payments while the car is in the shop, though this money should come back to you if the dealer offers a buyback.
They may or may not have to pay you for the cost of a rental vehicle while yours was in the shop, though they could be held liable for emergency repairs, roadside assistance and the tow truck bill to bring the car back to the dealer. If the car stalls or otherwise fails and you’re in a wreck, the personal injuries you’ve suffered maybe deal with in a court case, but that’s outside of the scope of this article.
Another factor that goes into the buyback offer is the car’s current worth. The value of the car drops as soon as you drive it off the lot, and it continues to fall with every mile you drive. The farther you’ve driven the car, the less the dealer has to offer you for it. If you’ve driven thousands of miles in the first months you owned it before the issue arose, the dealer can also argue that the car isn’t a lemon. Instead, they can say you’re wearing it out. If you’ve driven the car more miles than the mileage limit set by the warranty, the dealer may not have to give you anything for it. There are also time limits. For example, if the car has been owned more than a month, lemon laws may not apply.
Dealers don’t have to reimburse you for any negative equity you have. For example, they’re not liable for the old car debt you’ve rolled into the new car loan. If you’ve driven the car quite a bit, the car’s value may be well below the loan balance. You’re on the hook for that negative equity, too, if the dealer’s refund doesn’t pay off the remaining loan balance.
Depending on your state’s laws and your warranty, they may not have to reimburse you for taxes, licenses, registration and other fees you paid as part of the closing. They may not need to return your loan origination costs, either, if you financed the vehicle with them. You probably have to pay the cost of an outside mechanic assessing the car and proving that the issues existed prior to the car’s sale. You may be required to pay the legal fees to fight for the full value of your vehicle, too, if the dealer offers far less than you need to be made whole.