Do I Have A Choice Between Accepting A Replacement Vehicle Or A Refund As A Resolution To My Arizona Lemon Law Claim?

Key Takeaways:

• The Arizona Lemon Law does not explicitly say whether the consumer or the manufacturer gets to choose the settlement offer (i.e., a replacement vehicle or a buyback). However, because the Lemon Law is a remedial statute (i.e., a law designed to protect consumers), there is strong ground to argue that it is the consumer’s choice.

This is a gray area in the Arizona Lemon Law. The language of the statute does not specify who has the choice of whether to accept a replacement or refund, one way or the other. It is often unclear whether it’s the consumer’s right to choose or whether it’s the manufacturer’s right to choose.

The Lemon Laws held of several other States explicitly say who has the choice, whether it’s the consumer or the manufacturer. To my recollection, the majority of these out-of-state lemon laws that specify so do say that it’s the consumer’s choice, though there are a few states that say that it’s the manufacturer’s choice.

Since the Arizona Lemon Law doesn’t explicitly say one way or the other, we apply a consumer friendly lens to viewing and interpreting the law. Specifically, we look at the purpose of the statute. It can reasonably be claimed that the Arizona Lemon Law has a consumer protection purpose, because it is what is called a remedial statute.

A remedial statute is a statute that’s designed to remedy a particular problem. In the case of the Arizona Lemon Law, the statute is designed to remedy the problem of a defective new vehicle for the consumer. Remedial statutes are supposed to be broadly and liberally interpreted in favor of consumers, who the statute is designed to protect.

So, in our view, because the statute does not expressly say that the manufacturer gets to decide on a repurchase or replacement to remedy a Lemon vehicle situation, we believe that a consumer gets to decide. Again, we base this interpretation of the statute on its remedial purpose, which is to protect the consumer from the problem of unwittingly buying a new vehicle that turns out to be defective.

As far as which is the better option once the choice is in your hands as a consumer, that really depends on your individual case, as well as your specific desires and needs. There are pros and cons for both options.

One major benefit of a repurchase (i.e., a Lemon Law refund) is that it gives the consumer more flexibility if they get a lemon law refund. A lemon law refund is not a full refund. Arizona’s lemon law has a clause written into it called “usage offset.” This is a certain amount of money subtracted from the price of a full refund. It is typically based on miles accrued on the vehicle. We try and negotiate the offset sum as low as possible, but due to the wording of the statute, there will always be some amount of offset taken off the refund price of a vehicle.

Another benefit of repurchase (sometimes called a “buyback”) is that typically, these buybacks also pay off any loan or financing taken out for the car. This way, if the consumer wants to purchase a new vehicle from a different manufacturer, they will have the flexibility to do so without the encumbrance of paying off a large loan or rolling over a negative loan balance into a new purchase.

There are also downsides to repurchase. One downside, is that a mileage deduction for the total miles the consumer has used the vehicle is required for a Lemon Law refund.

Another potential downside is that in some cases, the consumer may be left with a prior loan balance from a vehicle trade-in. That is, if a consumer originally bought Vehicle X, and then traded in Vehicle X for Vehicle L (the Lemon), which carried over a remaining balance, that balance would become the responsibility of the consumer. This is called negative equity.

Under the law, the manufacturer does not have to pay that remaining prior loan balance, because it is a loan balance for the consumer’s prior vehicle, rather than for the current “Lemon” vehicle.

If there is a large amount of negative equity, it could even lead to the consumer having to pay to get out of the vehicle instead of getting a refund. In that situation, a replacement makes more sense. This is because a replacement keeps your same loan intact, and only substitutes the collateral (that is, the car), swapping out the defective Lemon vehicle for a brand new, and hopefully non-defective vehicle.

There are several guiding principles that govern these replacements:

• Sticker Price to Sticker Price: As long as the sticker price on the new vehicle is the same or lower, there is no charge to the consumer. If the consumer chooses a car with a sticker price that is higher than that of their “Lemon” vehicle, they are required to pay the price difference.
• Same Brand: Replacements chosen have to be within the same brand that the manufacturer makes. It doesn’t have to be the exact same model, but it does have to be the same brand.

One other benefit to a replacement is that there is no usage offset—that is, no amount is taken off the sticker price for mileage accrued on the Lemon vehicle.

So, when deciding which option to go with for settlement as a consumer in a Lemon Law case, you should first consider whether there’s negative equity or not. If there’s negative equity, you will likely want to take a replacement. Then you should also look at whether the mileage deduction of a Lemon Law refund is acceptable to you.

If there is no negative equity and the mileage deduction is acceptable, the decision really comes down to whether you want to take a replacement and stay with the same brand, or whether you prefer to just get out of the loan and get a refund so that you can and go to a different brand.

For more information on Replacement Vehicle Vs. Refund In A Lemon Law Claim, a Free Lemon Law Evaluation is your next best step. Get the evaluation you are seeking by calling (480) 237-2744 today.