Am I Going To Be Stuck With My Lemon?

In this article, you will discover:

• Possible Lemon Law settlement outcomes.
• How the mileage on your vehicle can affect your compensation.
• How to avoid paying for an Arizona Lemon Law attorney out of pocket.
• What happens when you trade-in a “Lemon” vehicle.

If your vehicle qualifies under the Arizona Lemon Law, the manufacturer has three options to make it right to you out-of-court:

• Buy Back the Lemon vehicle from you
• Replace the Lemon vehicle with a new one that you’ve chosen
• Compensate you for breach of warranty

When it comes to our 3-Step Out-of-Court Lemonaid Resolution Process, both sides must agree on the best solution. If the manufacturer agrees your vehicle is a Lemon, they typically offer to buy it back from you or replace it with a new vehicle.

The way a Buyback works under the Arizona Lemon Law, is that the company pays you everything you’ve paid towards the vehicle, including financing charges, tax/title/license, and pays off any outstanding loan balance, minus an offset for mileage.

Unfortunately, that usage offset cannot be zero in Arizona. It is usually calculated at cents per mile that both sides agree to. The Arizona Lemon Law doesn’t specify a formula for mileage. It just references a “reasonable” offset.

Reasonable in the context of settlement is what both sides agree on. We obviously argue mileage should be as low as possible, and the other side wants the mileage to be as high as possible. We always negotiate the mileage offset to be as low as possible, and it’s up to you whether you approve the mileage deduction or not. Typically, both sides ultimately agree to an amount they can live with.

For example, if a vehicle has 10,000 miles on it and mileage rate offered is 30 cents per mile, $3,000 would be subtracted from your refund if you agree that is a reasonable amount based on the cost of your vehicle.

The way new vehicle replacements work is MSRP value to MSRP value—that is, Sticker Price to Sticker Price. If you have a loan, you keep the same loan payment terms and swap out the Lemon vehicle for comparable new vehicle; this is called a substitution of collateral. If a new vehicle replacement is offered, you will search for an acceptable replacement vehicle (from the same manufacturer brand) to replace your Lemon vehicle.

You basically get a credit for your sticker price, so we recommend searching for a replacement vehicle that matches as closely as possible in price. If the sticker price matches, you don’t have to pay anything for your new vehicle. If the sticker price is higher for the new replacement vehicle, you must pay the difference out of pocket. If the sticker price on the replacement vehicle is lower though, they don’t refund you the difference, so it doesn’t make sense to choose a lower cost replacement.

In Arizona, with Lemon Law Buybacks and vehicle replacements, manufacturers are not required to pay you for aftermarket add-ons—options added to your vehicle that are made by companies who are not the vehicle’s original manufacturer, such as a stereo, lift kit, tires, or rims.

You won’t be paid for those added-on features by the manufacturer, so you can remove them from the vehicle and transfer them to your new replacement or you can sell them.

Keep in mind the “Lemon” vehicle that’s being reacquired should be put back to stock as much as possible. You can’t just give them a stripped-down vehicle that doesn’t work properly. If you do that you could be charged for the missing original manufacturer’s components.

Other items are that are typically not recoverable under the Arizona Lemon Law are extended warranties provided by third-party companies and sold by the dealer, maintenance plans sold by the dealer, and gap insurance. You can get a prorated refund from those particular companies if the service plans are cancelled, but we recommend not seeking that until there is a finalized deal.

An alternative out-of-court resolution to a Lemon Law Buyback or replacement is cash compensation for breach of warranty with you keeping the vehicle. This type of compensation is not written into the Arizona Lemon Law (it is a type of compensation for a similar claim called breach of warranty), but the legal system generally promotes compromise so long both sides agree to it.

This cash compensation is for having overpaid for the vehicle and your inconvenience. It can be an attractive option depending (obviously) on the amount of money offered and on if your vehicle appears to be properly fixed.

There’s no specific formula for cash compensation in Lemon Law or breach of warranty matters, but the easiest way to look at it is New versus Used. You paid for a new vehicle, but you got the equivalent of a used, run-down vehicle due to its defects and repair history. You should get reimbursed for the value gap because your vehicle should have cost less when you bought it if its defect and repair issues were foreseeable.

With each out-of-court settlement option (Lemon Law repurchase or replacement; cash compensation), you are entitled to seek attorneys’ fees as well as part of the overall settlement.

Although manufacturers generally do not differentiate between attorneys’ fees and compensation to you when making cash compensation offers where you keep your vehicle, attorneys’ fees are included in such offers. Otherwise, the offers would be substantially lower.

If you no longer want your vehicle, you can trade it in if a cash compensation settlement is reached and the vehicle is kept. Since the settlement is confidential, your vehicle does not actually get tagged or labeled as a “Lemon” even if you may feel that that’s what the vehicle is. You can trade-in the vehicle per normal without there being any indication the vehicle is a Lemon on Carfax or any other online database.

With that being said, your vehicle’s repair history may affect the trade-in value. However, past consumers have told us that the trade-in value is affected more with an individual private buyer by this than with a dealer.

The reason is, that the dealer looks at the current condition of your vehicle. If the vehicle seems to be in a good state of repair and appears to be fixed, typically, they will not reduce the vehicle’s value much based on the repair history although, this varies from dealer to dealer.

The last thing you should do is scrap your Lemon vehicle. There is simply no real need to scrap a vehicle when it turns out to be a “Lemon” because you can seek Lemon Law compensation as described above.

Even if your vehicle is not reacquired by the manufacturer and you settle for cash compensation it is still not advisable to scrap the vehicle. Often a dealership will give you a better value for your vehicle than a scrapyard, even if the vehicle is in a state of disrepair. The dealer that accepts your vehicle as a trade-in will try to recondition the vehicle and then sell it for a higher price.

For more information on the Lemon Law in Arizona, a Free Lemon Law Evaluation is your next best step. Find out if your vehicle qualifies for Free Lemon Law Help by calling (480) 237-2744 today.