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California Lemon Law Repurchase Formula

If you are lucky enough to convince the manufacturer to buy back (or repurchase) your vehicle pursuant to the California Lemon Law, there is a very specific formula that the manufacturer must follow when it computes the amount of money that they must return to you.

According to the Song-Beverly Consumer Warranty Act, the manufacturer must refund the following to you:

  • Down payment
  • Monthly payments
  • License and Registration Fees (although these are usually prorated into the monthly payments)
  • Sales Tax (also usually prorated into the monthly payments)
  • Rental Car Expenses
  • Incedental Costs (eg. towing, taxi or other collateral costs incurred)

You should note that loss of wages and emotional frustration are not items that you can recoup under the lemon law. OFFSET DEDUCTION CALCULATION

The manufacturer is allowed to deduct a mileage offset. Here is the formula:

(Cash price of vehicle) TIMES (# of miles when first presented it for repair) DIVIDED by 120,000 miles

For example, if the cash price of your vehicle (from the sales contract) is $30,000, and you first presented the vehicle to an authorized dealership for repair of the main defect at 10,000 miles, then the mileage deduction would be: $2,500.

( $30,000 X 10,000 miles ) / 120,000 miles = $2,500

Be very careful to make sure that the manufacturer uses the right mileage for the offset. If they are repurchasing the vehicle because of an engine problem, they must use the mileage of the first time you presented the vehicle to one of their authorized dealerships for repair (for the engine defect).

Although manufacturer reps don’t usually do this, we have seen a few times where they have tried to trick us by using a much higher mileage when applying the formula.

The manufacturer is also obligated to pay off the remainder of any loan you may have on the vehicle. They will pay off the loan directly to your lending institution. If you paid cash for the vehicle up front and you didn’t get a loan, then the manufacturer will refund the total amount you paid (minus the mileage offset).

Finally, if you hired an attorney, the manufacturer is obligated to pay your attorney’s reasonable fees and costs as well. It goes without saying that your attorney’s fees and costs would be substantially higher if you filed a lawsuit than during the claims stage.

Additional resources provided by the author

Consumers wishing to learn more about the Song-Beverly Warranty Act can visit California Department of Consumer Affairs website listed below.

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