Should I Keep My Car and Settle a Lemon Law Claim for Cash?

Settling for an Arizona Lemon Law claim for cash with keeping your vehicle has several benefits, but it depends on whether the vehicle appears to be properly fixed and the amount of cash compensation. In many cases, cash can be a good resolution, especially if it’s substantial cash compensation that’s being offered, because those types of settlements are the quickest to negotiate and the easiest to complete administratively.

Here’s are the reasons why:

There are fewer moving parts involved with cash compensation settlements than with Arizona Lemon Law repurchases or replacements. There’s a lot more to do logistically for repurchases or replacements because you have to schedule getting the vehicle reacquired at a local dealer, there has to be a transfer agent, and there are other parts of the settlement to negotiate beyond just cash. Those parts include the usage fee and deductions, and vehicle lenders sometimes have to be involved to approve certain deals.

Those problems and administrative burdens are avoided with a cash compensation settlement, which is why companies tend to prefer cash compensation. They don’t have to wholesale the reacquired vehicle at a loss because it’s labeled a Lemon or pay a third-party company to handle that process. Most companies prefer to just cut you a big check and basically say, “I’m sorry.”

There’s also more flexibility for both sides with cash compensation. No one has to schedule repurchases or replacements if you’re just getting a check. You can keep driving your car. The warranty is still valid, so if you have future repair issues and the vehicle’s still under warranty, you’re covered. The vehicle does not get tagged as a Lemon since the settlement is confidential.  Finally, if you’re continuing to have problems with the vehicle, you can just use the cash to facilitate trading it out.

Is a Vehicle Protected Under the Arizona Lemon Law If the Warranty Has Expired?

If the original manufacturer’s warranty has expired, your vehicle is only protected by the Arizona Lemon Law in limited circumstances. There’s no Lemon Law protection in situations where repairs were performed on the vehicle after the warranty expired. But if there are repairs that were done before the warranty expired and the vehicle falls under the Arizona Lemon Law period (the earlier of two years or 24,000 miles from the date of acquisition, plus six months to bring an action after that), then there would still be a potential Lemon Law claim, even though the warranty has expired.

Most cars have at least three-year warranties, but some motorcycles and motorhomes have one to two year warranties. So those warranties could end up expiring either at the same time as the Lemon Law period or even before it because there is a part of the Lemon Law that says the two years/24,000 miles limit is shortened for a one-year warranty to one year or 24,000 miles, whichever comes first.

In short, the Arizona Lemon Law could cover your vehicle even if the warranty’s expired, as long as there are too many warranty repairs or too much time out of service for a warranty repair during the Lemon Law period and during the warranty period and the 6 months to bring a claim after those periods has not expired.

What Potential Damages Could Be Recovered If an Arizona Lemon Law Lawsuit Is Won?

If it is solely an Arizona Lemon Law claim, then what could be obtained is a repurchase or a new vehicle replacement, plus reasonable attorney’s fees and court costs. The way a repurchase, or Lemon Law Buyback, works is they pay you back all the payments you made towards the vehicle. They also pay off any outstanding loan balance if there’s a loan minus an offset for mileage, which would be up to the jury to determine what’s reasonable. We would argue that should be as low as possible, especially because the vehicle’s been defective, but it is up to the jury to decide.

There are several ways to determine what the mileage rate for the usage offset should be. You can look at what the mileage is for the overage on a lease, which is typically 20 to 25 cents a mile, but again, you can argue that it should even be lower than that if the product was defective. Manufacturers often argue the IRS standard, which is substantially higher (50 cents or more a mile). They also argue that if it’s a more expensive vehicle, the mileage should be higher, as well, because it should be proportional to the cost of the vehicle. We argue against that, but it’s up to the jury to decide what is, in fact, reasonable.

What would also get deducted from an Arizona Lemon Law Buyback or refund is any prior loan balance and any third-party extended warranty and coverage. If a Buyback judgment is obtained, then a prorated refund can be requested from those independent companies.  You don’t get all of your money back, but you can get a substantial amount of your money back.

The other potential resolution is a new vehicle replacement, and the way that works is MSRP to MSRP value, which means sticker price to sticker price. If you get a new vehicle replacement, as long as it’s the brand of the manufacturer, you can typically choose a different vehicle than your own as long as the price matches. If the price is lower, you can’t get that difference refunded, so we always recommend trying to match up the prices. If the price is higher, you would have to pay that sticker price difference. You also need lender approval for the replacement, but if you have a judgment, it’s highly unlikely that the lender will not approve the substitution of collateral, which again means just swapping out vehicles under the same loan.

Under both of those results, the consumer is also entitled to recover reasonable attorney’s fees and court costs. A fee petition is filed with the court after a successful verdict, and then the judge rules on the amount of fees and costs. Normally, the courts will provide most (if not all) of the fees as long as the consumer has negotiated in good faith as far as the settlement history (because judges want to see that you at least tried to resolve the case before you went to court).

For more information on the Arizona Lemon Law, a Free Lemon Law Evaluation is your next best step. Please call (480) 237-2744 for Free Lemon Law help today.