You have probably heard that under the CA Lemon Law (the Song-Beverly Warranty Act) if a vehicle is declared defective (a lemon) then the consumer can choose to either get a refund or a replacement car. The refund option is the most common option, but many consumers opt for the replacement. Does that mean you get a free new car even if you drove the old one for a few years?
For example, if you purchased a Chevrolet Silverado 1500 truck and it began breaking down after 6,000 miles you are entitled to get a statutory refund. If you paid $40,000 for the truck (or leased or financed it) you will get back all the money you paid plus the loan balance, if any, will be paid off but you will have to pay for the 6,000 miles. By law, the math for that charge is miles driven times purchase price divided by 120,000. In this example, that amounts to $2,000. So, say your down payment was $5,000 and you paid $500 over 30 months (total paid $20,000), then you will get back the $$8,000.
But what if you want the replacement vehicle? Short answer – you will get credit for $18,000 towards the replacement vehicle. This is why we recommend that you take the refund option and then go buy whatever replacement vehicle you desire. Occasionally, manufacturers will offer to waive the mileage charge (the $2,000 in this example) if you opt to take the replacement vehicle instead of a refund. In such a scenario the replacement is a better deal if you intend to buy the same vehicle anyway.
What if the vehicle price has gone up between the time you got your vehicle and when you lemon-ed it? In that case, you may consider fighting to get the replacement vehicle instead of a refund. Say you got a 2017 Maserati Ghibli for $50,000. Then it happened to be a lemon and in December of 2019 you hired our law firm and we forced Maserati to buy it back. If by that time the 2020 Maserati Ghibli is being sold for $60,000 then you may prefer to take a new replacement vehicle instead of the cash. If you take the cash, you will be $10,000 short when buying a new one. The manufacturer is also responsible for covering all collateral charges such as tax and title when replacing the vehicle.
Manufacturer’s take on the replacement of collateral option. A lot of manufacturers prefer that you get a replacement vehicle because you remain a client and they get to sell another vehicle. Some try to take advantage of the circumstances and in fact, they benefit from it because you end up asking for a more expansive vehicle and thus end up paying them the difference. Others try to have consumers pay out of pocket even if the replacement vehicle would not cost more than what you have paid for the original vehicle. In practical terms, however, the refund is always a better option. Most people lease or finance their cars and it is simply better to get your $20,000 or $50,000 refund and start paying monthly payments on a new car than to get a new car without getting a refund. Of course, each case is unique and as long as you have an experienced lemon law attorney, he/she will guide you through the options so that you can get the best outcome for your needs. This is what we do day in and day out at The Margarian Law Firm.