When your new vehicle turns out to be a lemon, state and federal laws provide remedies to make you whole. Lemon law remedies range from full refunds to replacement vehicles to cash settlements. Understanding your options helps you pursue the resolution that best fits your situation.
The Three Primary Remedies
Most lemon laws provide three potential remedies: refund (buyback), replacement, or cash compensation. The appropriate remedy depends on your state's law, your specific situation, and your preferences.
Not all remedies are available in all situations. State laws vary in what they require and when.
Vehicle Repurchase (Buyback)
A repurchase or buyback requires the manufacturer to refund your purchase price minus a reasonable allowance for your use before problems began. This is often the most complete remedy—you get your money back and return the defective vehicle.
The refund typically includes the purchase price or lease payments, sales tax, registration fees, finance charges incurred, towing and rental car costs, and attorney's fees.
The usage allowance or "mileage offset" compensates the manufacturer for miles you drove before problems emerged. The calculation varies by state—typically based on mileage at first repair attempt relative to expected vehicle life.
Vehicle Replacement
Instead of a refund, you can often choose a replacement vehicle—a new vehicle comparable to what you purchased. Replacement makes sense if you still want the same type of vehicle and believe the original was simply a manufacturing defect.
Replacements should be identical or substantially similar in value, features, and options. If the exact model isn't available, you may negotiate for a comparable vehicle.
Cash Compensation
Sometimes manufacturers offer cash compensation instead of buyback or replacement—often called a "cash-and-keep" settlement. You keep the vehicle and receive money for the diminished value and your troubles.
Cash settlements might be appropriate if the vehicle is drivable and problems are more annoyance than safety issue, if repairs have been made and you're willing to keep the vehicle, or if the settlement amount makes keeping the vehicle worthwhile.
Be cautious about cash settlements that don't adequately compensate you—manufacturers sometimes offer lowball amounts hoping consumers will accept rather than fight.
Manufacturer's Buyback Programs
Some manufacturers have internal buyback programs outside of formal lemon law claims. These may process faster but often result in lower compensation. Consider whether the convenience is worth potentially leaving money on the table.
Incidental and Consequential Damages
Beyond the vehicle value, you may recover incidental damages—costs directly related to the lemon, like towing, rental cars, and repair attempts. Consequential damages cover losses resulting from the defect, like missed work or medical bills from an accident.
Document all expenses related to the lemon. Receipts and records support your damage claims.
Attorney's Fees
Most lemon laws require manufacturers to pay the consumer's attorney's fees if the consumer prevails. This means you can hire a lawyer without upfront cost—fees come from the manufacturer, not your recovery.
The availability of fee-shifting makes lemon law cases viable even when vehicle values are modest.
Arbitration vs. Litigation
Some manufacturers require arbitration before you can sue. Many states also have voluntary arbitration programs. Arbitration can be faster but may result in lower awards. Some programs are manufacturer-sponsored and may favor the company.
If arbitration is required and you lose, you can often still sue in court. Consult an attorney about whether to use arbitration or proceed directly to litigation.
Settlement Negotiations
Most lemon law cases settle before trial. Manufacturers often prefer to settle rather than risk larger verdicts and negative publicity. Effective negotiation requires understanding your claim's value and the manufacturer's exposure.
Don't accept the first offer—initial settlement proposals are typically lowball. An experienced attorney knows the realistic range for your case.
Civil Penalties
If the manufacturer's conduct was willful—deliberately refusing to repurchase a clear lemon—some states allow civil penalties, sometimes doubling or tripling your recovery. Egregious manufacturer behavior increases your potential recovery.
Getting Legal Help
Lemon law attorneys handle cases on contingency, with fees paid by the manufacturer. They understand the remedies available, can calculate your claim's full value, and negotiate effectively. Given that attorney's fees are paid by the other side, there's no reason to handle a lemon law claim without professional help.