What Are the Possible Outcomes in a Lemon Law Case?

There are three main outcomes possible in a Lemon Law case. They are a Lemon Law Buyback, New Vehicle Replacement, or Cash Compensation.

The first two are expressly spelled out in the Arizona Lemon Law statute, and those are a vehicle repurchase or a replacement. The way a repurchase, also called a Lemon Law Buyback, works is the company will pay you back all the payments you’ve made towards the vehicle including any down payment or trade in value minus an offset for miles/usage. Unfortunately, mileage can’t be zero because it is written into the law that manufacturers are entitled to a reasonable offset, the keyword there being “reasonable.”  In terms of settlement, what is a reasonable offset is just what both sides agree to as being reasonable. We always try and negotiate that as low as we possibly can.

Other possible deductions in a Buyback include a negative loan balance from a prior vehicle purchase that was traded in to the current vehicle. Manufacturers are not responsible to pay for that because that was a loan for a prior vehicle, so that would get deducted from the refund. Another thing that could potentially be deducted would be a third-party extended warranty, and by third-party, I mean not the manufacturer, but an independent warranty company. That would not be refunded by the manufacturer, nor would gap insurance if it’s by a third-party company.

However, if you do reach an Arizona Lemon Law settlement for a Buyback, you can cancel those contracts once you’ve completed the settlement. We don’t recommend that those be cancelled before then just to prevent a Murphy’s Law situation in the event you had an accident or another major issue were to arise before your vehicle is returned. If you do reach a settlement for a Buyback, what you can do is contact the extended warranty company and the gap insurance company (if those exist) and request a prorated refund once the settlement terms are completed. You won’t get 100% of your money back for those contracts, but you can get a significant portion back.

On top of that, you’re also entitled to recover attorney’s fees for a successfully resolved Arizona Lemon Law case. We seek attorney’s fees from the manufacturers as part of a settlement. We never charge our clients out of pocket for out-of-court representation, so we only get paid if our clients get resolution.

The second option under the Arizona Lemon Law is a new vehicle replacement. The way that works is a sticker price to sticker price vehicle exchange, so if the sticker price matches, there’s no charge. It’s called a substitution of collateral. That just means you swap out vehicles and keep the same loan. Most banks will agree to that because you’re swapping a used Lemon vehicle (one that was defective) for a brand-new vehicle (one that hopefully will not be defective that) so it’s more valuable collateral on the loan, which benefits the lender as well.

The challenge with some lenders is they’ve just never dealt with anything like this before, so they have nonsensical internal policies about substitution of collateral. We sometimes have to negotiate with lenders or even threaten to come after them if they don’t approve such a deal, which, again, is to their own benefit.

On top of the new replacement vehicle, the consumer can also recover reasonable attorney’s fees from the manufacturer under the Arizona Lemon Law.  Again, we seek our attorney’s fees from the manufacturer in that situation.

The third settlement option, a cash and keep compensation settlement, is not specifically required by the Arizona Lemon Law but is an option generally available for warranty law matters. (The Arizona Lemon Law is basically a warranty enforcement statute, but there are other areas of law that enforce warranties as well.)

In a cash and keep settlement, the consumer receives a cash compensation while keeping the vehicle. That could be attractive depending on the amount of compensation and on whether the vehicle appears to be properly fixed.

Even if it’s not properly fixed, a cash amount might work out to be a better deal than a Lemon Law repurchase because of the mileage offset/deduction for repurchases. If a vehicle has high mileage, it cash compensation might come out to be a better deal, depending on the trade-in value of the vehicle, because the cash can be used to facilitate trading out the vehicle if it’s still defective.

The thing about cash compensation is, unlike with purchases or replacements, the companies do not separate out what they’re offering for attorneys’ fees. They typically offer one lump sum, so what the consumer has to do in that situation is just decide if the amount of money netted to them is sufficient to settle for once the attorneys’ fees are deducted from the settlement total.

Our firm actually has a Fair Fee Guarantee, meaning we will never take more than our clients for out-of-court settlements. So even though we do have a flat fee, if it’s a smaller settlement offer that doesn’t fully cover our fee and the clients don’t want to go to court, we will voluntarily cut our fees so we don’t get paid more than our clients out of the settlement.

Many firms don’t do that because they don’t care what their clients get as long as they get paid their full fee. If those firms settle a case, they’re guaranteed their fee, even if it’s higher than what their own client gets. We think that is an unfair win-lose result. We believe only in win-win results.

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.