Buyback vs. Replacement: Which Option Is Better for Lemon Law Victims?

You’re in the thick of a lemon law claim, and you’re asked by your lemon law attorney what form of compensation you want when you win. Maybe you knew going in what you wanted. It might be that you aren’t sure at this point because you’ve had some time to think it over. We’ll look at buybacks and replacements and see what the benefits of each are.

Before we do that, we’ll share a key point: to get the compensation you desire, you first have to win your case. It’s vital to have a skilled and experienced lemon law attorney represent you against the vehicle manufacturer. The manufacturer may not willingly admit to the substantial defect you say is plaguing your vehicle. It is not unusual for the manufacturer to put up barriers to your claim or deny it altogether.

Let’s look at how the lemon law process unfolds and how a lemon law lawyer guides their client towards resolution and gaining compensation. We’ll see what issues could crop up depending on the choice of compensation and how the attorney fights for the client’s rights to maximum compensation under the law.

The Lemon Law Process

Every state has different lemon laws. They’re all based on the general premise that the vehicle has to exhibit a substantial defect that severely impacts its use, value, or safety. The manufacturer is usually given 3–4 repair attempts, by law, to fix the vehicle. If they cannot, or will not, the lemon law attorney can use the client’s evidence, along with expert witnesses and other data, to build a lemon law claim. The attorney knows the full criteria the state requires for a vehicle to be declared a lemon (often this includes, beyond evidence of the defect, reporting it during certain timeframes and mileage amounts). Also, the lawyer will review the warranty on the vehicle and determine if and how the problem falls under the warranty provisions.

The attorney, in most states, sends a notice to the manufacturer that a claim will be made on behalf of the client. Often, a state will provide one last repair attempt to the manufacturer. If that fails or the manufacturer ignores it, the attorney will proceed with the claim.

Throughout the lemon law process, the attorney protects the client’s rights. The goal is to end the client’s frustration with the defective vehicle and have the manufacturer provide the client with either a buyback or a replacement. The result the attorney works towards is that the client is made whole, not further burdened with the costs and trouble the defective vehicle caused.

Which Compensation Option Should You Choose?

There is no right answer to this question; it depends on the individual. We’ll look at both options to give you a broad understanding of each.

Buyback

Often, people think this is a straight-up refund from the manufacturer for the defective vehicle. That is not true. The consumer does get their loan paid off and gets back their down payment, monthly payments, tax, registration, and also reimbursement for factory- and dealer-provided accessories installed at the time of delivery, plus incidental costs related to the defective vehicle, such as towing and rental cars. But there is a mileage offset fee deducted from this refund amount.

How is the Offset Fee Calculated?

The offset fee is calculated using a formula based on the miles that the owner drove by the first report of the issue. It is also based on the statutory life of the vehicle (computed differently in different states; often at 120,000 miles). Here is an example of a mileage offset fee (your attorney will advise you what the formula is in your state.)

Mileage Offset = (Actual Price of Vehicle x Miles Driven at First Repair Attempt) / 120,000

It’s helpful to know what’s included in the ‘actual price of the vehicle.’ It covers the base model price, meaning the starting MSRP of the vehicle. It also includes both factory- and dealer-installed options installed on the car when it left the factory or that you paid for at the dealership. Also included are transportation and destination fees; these are listed on the window sticker.

Here’s how your total refund would be calculated (example): 

If you bought a car for $60,000 and first brought it in for an engine defect at 12,000 miles,

Multiply $60,000 by 12,000 = 720,000,000

Divide 720,000,000 by 120,000 = $6,000.00

So, $6,000.00 would be deducted from your total refund for the time you drove the car without the defect.

Key Takeaway: Remember that the sooner a defect is reported, the smaller your offset fee deduction will be. It exists to take into account that you owned the car for X many miles before the defect was first reported.

Replacement

Under most state laws, a manufacturer must provide a substantially identical replacement that matches your original vehicle’s make, model, and general trim level.

Some of the more minor details, like interior or exterior color, might vary if an exact match is unavailable. The replacement must be a new vehicle equipped with the same factory options and warranties.

Note: If your specific model year is no longer in production, the manufacturer typically provides a current-year model to fulfill the requirement.

But Why Try The Same Model Again?

Some people might wonder, why would anyone choose a replacement after having had problems with a particular vehicle model? There are many potential reasons: maybe the particular model is one that a person has always wanted, and unfortunately the vehicle they bought turned out to be defective. The consumer may be willing to try this model again, thinking that their faulty vehicle was just accidentally defective.

It might also be that the consumer thinks that they’ve invested a lot of time researching the perfect vehicle for their use case: big enough for the family, perfect for off-roading, great for taking long trips, or whatever the specialized use is. Having to go through another long research session to find another good fit can seem like too much to handle. They’re willing to get a replacement and try the model again.

Please note: there could be a problem finding a replacement for a vehicle. Your attorney will negotiate with the manufacturer to help you gain an exact replacement or a newer model.

Key point: The offset fee calculation we discussed earlier applies to receiving a replacement vehicle, too, following these specifics:

• The fee is based on the mileage recorded at the first repair attempt for the problem that made the car a lemon.
• Since there is no “cash back” in a replacement (unlike a buyback), you often have to pay this offset amount directly to the manufacturer or dealer before taking delivery of the new car.
• Some lenders allow you to roll this offset fee into your existing or updated auto loan.
• Your existing loan usually remains in place but is adjusted to reflect the new vehicle. Manufacturers are generally required to coordinate with your lender to ensure the transition is seamless.
• State laws vary. Consult your attorney for the standard procedures in your state.

Potential Barriers to Receiving Compensation

It would be great if lemon law claims were easy to resolve; the attorney could simply approach the manufacturer and strike a top-rate compensation deal for their client with complete manufacturer agreement. The real world is not like that and often requires significant effort by the attorney to gain the compensation the client is rightfully due under the law for their defective vehicle.

Why is this necessary? The manufacturer can avoid, deny, or minimize the lemon law claim. It can even accuse the vehicle owner of neglecting or abusing the vehicle, blaming them for the car or truck’s problems. The attorney works to prove that the vehicle’s problem is built-in; it is a substantial defect, not anything wrong the owner has done to cause it to perform poorly or to cause a safety risk.

Why You Need a Lemon Law Attorney

Selecting which compensation option you want for a lemon vehicle is but one part of a lemon law claim. The majority of it depends on the skill and experience of the attorney. Gaining compensation is more likely when a lemon law attorney works aggressively to hold the manufacturer accountable for the vehicle’s defect. Since most lemon law cases settle out of court, your attorney’s negotiation skills put you in the best position to ensure the manufacturer deals fairly and provides just compensation.

Trust Allen Stewart, P.C. for Expert Lemon Law Representation

Allen Stewart, P.C. provides expert lemon law representation that holds the manufacturer accountable. We fight for your rights and have won many cases across the country. Our firm is well-known in Texas, New York, California, and throughout the nation as attorneys who give their clients the best opportunity to gain maximum compensation for defective vehicles.

Are you wondering if you need a lawyer? Please know that the manufacturer will defend its interests with its legal team. It’s vital that you have top lemon law attorneys protecting your rights. You won’t have to worry about affording a lawyer. The manufacturer is obligated to pay your attorney costs when you win your case.

Time is of the essence with lemon law claims. Take advantage of our free case review. Present your evidence to our attorneys, and should your claim be valid, we can represent you against the manufacturer.

Remember: the key step to gaining compensation (whether buyback or replacement) for your lemon vehicle is to win your case. Call Allen Stewart, P.C. today (866.440.2460), or if you prefer, schedule your free consultation online.