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Lemon law

Lemon laws protect consumers who have bought a defective vehicle. The seller of a "lemon" car may be required to repair it, replace it, or refund the purchase.

Adam S. Alexander | Jul 17, 2019

Michigan Lemon Law: Calculating the Repurchase

1. Return of Your Purchase Price or Lease Price Michigan’s Lemon Law at MCL 257.1403(1)(a), permits recovery of either a replacement vehicle or the purchase price of your defective vehicle: “The manufacturer must either replace the new motor vehicle with a comparable replacement motor vehicle currently in production and acceptable to the consumer or accept return of the vehicle and refund to the consumer the purchase price.” Under section MCL 257.1401(l), “purchase price” means: . . . the actual vehicle sales price listed on the buyer’s order including any cash payment by the consumer and the sum equal to any allowance for any trade-in but excludes debt from any other transaction as well as any manufacturer to consumer discount, rebate, or incentive appearing in the agreement or contract that the consumer received or that was applied to reduce the purchase cost. Additionally, any sales tax, license and registration fees, and similar government charges not included elsewhere paid by the consumer are included as a part of purchase price.” 2. Payoff of Finance or Lease Balance If you financed or leased your vehicle, part of the purchase price refund will be provided to the finance company to satisfy the balance of your loan or lease: A refund required under this subsection or subsection (1) shall be made to the consumer and the secured party, if any, as their interests exist at the time the refund is to be made. The lessor, if any, shall be notified if a refund is made to a lessee under this act. A lessor shall not assess a fee for early termination of a lease under this act. 257.1403(4) You will be specifically required to provide the current payoff amount of your loan or lease in connection with the repurchase process. 3. Towing and Rental Costs 257.1403(2) also provides for additional damages: “. . .if towing services and rental vehicles were not made available without cost to the consumer, the manufacturer shall also reimburse the consumer for those towing costs and reasonable costs for a comparable rental vehicle that were incurred as a direct result of the defect or condition.” 4. After Market Items Let’s say you purchased a performance intake or exhaust, or a bed liner or another after-market accessory. Will you be reimbursed? The only language in the Lemon Law regarding modifications is limited: “The purchase price or lease price includes the cost of any options or other modifications installed or made by or for the manufacturer. . .” MCL 257.1403(2) So it would seem that only manufacturer-approved and installed items would be reimbursed. In practice, my clients have been reimbursed for all sorts of after-market items, some of which were not installed by the dealer. The answer actually depends on the type of item, the age of the item and where you bought it. Generally, after-market items purchased from and installed by an authorized dealer will be reimbursed. If the item is easily removable, you may be asked to simply remove and keep it yourself. Non-conforming items that potentially void your warranty will be more difficult. In sum, the reimbursement of after-market items is part of the negotiation that your attorney will engage in to provide you the best possible settlement. Of course, you will have to provide the receipt for any after-market item if you expect to be reimbursed. 5. Extended Warranties, GAP Insurance, Credit/Disability Insurance Extra insurance and warranties are not specifically discussed in Michigan’s Lemon Law. But MCL 257.1403(2) generally provides for recovery of: “. . . the amount of all other charges made by or for the manufacturer. . .” These “charges” are understood to mean both finance charges and extra warranty and insurance coverage. Accordingly, these items are going to be reimbursed, either in part or in whole. Generally, you will receive the pro-rated refund for any unused portion of any extended warranty. And you should be fully reimbursed for any insurance you arranged at the time of purchase through the selling dealer. Notably, some manufacturers like to haggle on these items and offer less than full value. We have been successful on most occasions in recovering 100% of the outlay for extras. This also includes extras such as Scotchgard, rustproofing, fabric protection and paint protection. 6. Attorney Fees One important feature of the Michigan Lemon Law provision for payment of your attorney fees and court costs: A consumer who prevails in any action brought under this act may be allowed by the court to recover as part of the judgment a sum equal to the aggregate amount of cost and expenses, including attorneys' fees based on actual time expended by the attorney, determined by the court to have been reasonably incurred by the consumer for or in connection with the commencement and prosecution of such action, unless the court in its discretion shall determine that such an award of attorneys' fees would be inappropriate. MCL 257.1407(2) 7. Mileage Setoff Your recovery may be reduced based on the mileage on your odometer. The Michigan Lemon Law provides a very specific formula for determining the mileage setoff: A reasonable allowance for use is the purchase or lease price of the new motor vehicle multiplied by a fraction having as the denominator 100,000 miles and having as the numerator the miles directly attributable to use by the consumer and any previous consumer prior to his or her first report of a defect or condition that impairs the use or value of the new motor vehicle plus all mileage directly attributable to use by a consumer beyond 25,000 miles. MCL 257.1403(2) This calculation is confusing for some. Basically, if you have less than 25,000 miles on your odometer, your mileage setoff is capped at the time of your “first report of a defect. . .” For example, if you initially brought your vehicle for service with 5,000 miles on the odometer, your mileage setoff is capped at 5,000 miles. (This is assuming you don’t have more than 25,000 miles on the odometer, total. If you do, you simply add the excess mileage, over and above the 25,000 to the 5,000-mile cap). Example: Assuming you are responsible for only 5,000 miles, your calculation would look like this: 5,000/100,000 x Purchase Price The easy way to understand this is that 5,000/100,000 = 5%. If your purchase price was $20,000, your mileage setoff would be 5% of $20,000, or $1,000. Keep in mind that “mileage attributable to use by the consumer” should not include mileage on the vehicle before you purchased it, mileage that the dealer put on it either test-driving it or otherwise, or mileage to and from the service department. 8. Glass Damage, Body Damage, Missing Equipment You will also be docked for any damage to your vehicle that is not “normal wear and tear”. MCL 257.1407(2) indicates that the purchase price is reduced by: “. . . an amount equal to any appraised damage that is not attributable to normal use or to the defect or condition.” Door dings, dents, scratches, glass damage or missing items will cost you and be deducted from the repurchase calculations. I always recommend that my clients get these items repaired prior to the repurchase date because it will cost substantially more due to higher dealer repair costs. You should also consider filing an insurance claim for more severe damage. 9. Abuse or Neglect The Lemon Law will not protect you if it is determined that you failed to properly maintain your vehicle or if you had parts installed that caused the defects you are experiencing. MCL 257.1406 covers these potential legal defenses: This act does not apply to a defect or condition that is the result of either of the following: (a) A modification not installed or made by or for the manufacturer. (b) Abuse or neglect of the new motor vehicle or damage due to an accident that occurred after the new motor vehicle was purchased or leased by the consumer. The most common item that causes vehicle problems is a remote starter. Occasionally, installation of a remote starter will result electrical problems or battery drain that is mistakenly confused with engine defects. High-performance after-market items are also troublesome, and of course if you fail to get regularly scheduled oil changes and/or maintenance, this may adversely impact your Lemon Law claim or recovery. Conclusion Your recovery under Michigan’s Lemon Law is dependent on multiple factors. If you have any questions or doubts about whether you have a Lemon vehicle, or what you may be entitled to under the law, please contact the Alexander Law Firm at (248) 246-6353.

Adam S. Alexander | Jul 13, 2019

Lemon Law - Intermittent Defects

It Comes and it Goes What if you are experiencing a vehicle defect that only happens once in a while? I recently represented a Michigan consumer whose vehicle sometimes wouldn’t start and left him stranded on the highway on several occasions. Sometimes the vehicle would start back up after a few minutes, but on another occasion, it had to be towed to the dealer service department. But when the service department inspected the vehicle, they could not duplicate the problem or find any defects. No codes, no stalling, nothing. While intermittent defects are very frustrating, you should never give up the fight to prove your case. There are several tactics that you can use to expose the problem. Document the Problem If you have an engine light that goes on and off, excessive noises, (e.g. brakes, engine, transmission, rear end), or other defects that can be seen or heard, document them. Take photos, record the sound, get witnesses or show the dealer service department. The best way to prove a defect that comes and goes is to get some evidence. Photos, video and sound recordings will go a long way in court to rebut the manufacturer or dealer assertion that the problem cannot be found. (Consult your lawyer before utilizing this or any strategy). Keep Taking the Vehicle to the Shop Take your vehicle back to the service department over and over again. While this strategy can be inconvenient and interfere with your life and schedule, the repeated sight of your vehicle in the service department may cause the dealer to go to the necessary extreme to locate the defect. The dealer may conduct an extensive test drive, utilize advanced diagnostic equipment and even contact the engineer from the manufacturer. At some point your dealer may refuse to continue repair attempts. If this occurs, consider taking it to a different authorized dealer. The more eyes on the problem, the more likely its discovery. (Consult your lawyer before utilizing this or any strategy). Hire an Expert If you are not able to photograph or record the defect, and the dealer can’t find it, the next best option is to hire an expert to conduct a test drive and inspection. A third-party certified mechanic who can verify the defect you are experiencing is very persuasive in court and serves to cut off any argument by the defendant that the defect does not exist. (Consult your lawyer before utilizing this or any strategy). What is the Law in Michigan Regarding Intermittent Defects? The Michigan Court of Appeals recently determined: Defendants’ reliance on a technician’s testimony, where the technician stated that on May 5, 2016, when he inspected the vehicle, “all systems operated as designed,” is misplaced. Plaintiff explained that the problem was intermittent (“[s]ometimes it starts, sometimes it does not”). Thus, the fact that the problem was not apparent on that particular day does not establish that the vehicle was actually free from defects, especially when plaintiff stated in an affidavit that the problem manifested itself again after May 2016. Moreover, even the technician admitted that “[d]iagnosing and solving a stalling complaint is complex in nature because of the multiple variables.” See Gomez v. Mercedez-Benz USA, LLC, Mich. Ct. App. No. 335661, (Feb. 20, 2018). (The Alexander Law Firm represented Mr. Gomez in this case and won the appeal, in part. The case was later settled) Conclusion In sum, automobiles are complex pieces of machinery encompassing thousands of parts and components. It is not unusual for you to experience defects or problems with your vehicle on certain days and not on others. This is a relatively normal experience, and using the strategies above may help you prove you have a Lemon.

Alicia L. Hinton | Apr 16, 2019

Car Buying Lending Limbo and Yo-Yo Scams

When a consumer purchases a vehicle to be financed, it is common that the car dealer has not yet obtained a lender to finance the sale. The consumer drives off the lot believing the car loan is approved according to the financial terms shown on the contract. In reality, funding might get rejected. WHAT LENDERS CONSIDER. Many factors are considered when a lender decides whether or not to fund the loan, including the amount of down payment, credit scores, prior repossessions or bankruptcies, how many optional products are added to the purchase, whether there is a trade-in with negative equity, etc. Lenders typically want to see that the buyer is financially invested in the vehicle reducing the risk of default on the loan. Lenders also want to minimize the loan to value ratio between what is owed on the loan and what the car is worth, so a trade-in with a substantial negative equity rolled into the new car loan would be a big risk factor. DEALER'S RIGHT TO CANCEL THE SALE. If the dealer can’t find a lender to fund the loan, in California, it is common for a vehicle purchase contract to include a section called “Seller’s Right to Cancel” on the back of the contract. This contract term typically states that it may take a few days for a seller to verify your credit and assign the contract, meaning get your car loan approved and transferred to a lender. If the seller is unable to assign the contract to a financial institution under terms acceptable to the seller, it may cancel the contract and demand return of the vehicle. (Alternatively, the dealer may choose to finance the sale in-house.) DEALER HAS 10 DAYS TO FINANCE OR CANCEL THE SALE. If the dealer cancels the contract, it must give the buyer written notice within 10 days of the date of the purchase contract, and the buyer must immediately return the vehicle, but the seller must return the buyer’s down payment and any trade-in vehicle. If the buyer refuses to return the vehicle, the contract terms usually state that the seller can charge for its expenses in taking the vehicle, including reasonable attorney’s fees. YO-YO SCAMS. Unscrupulous dealers may engage in what is commonly called a yo-yo scam by telling a buyer that she is approved for a loan knowing that is highly unlikely or even impossible. The dealer waits a couple of weeks and then calls the buyer demanding more money down or demanding the buyer sign a new contract with less favorable terms, such as a higher down payment, interest rate, or monthly payment. The bottom line is that a consumer is in no way obligated to sign a new contract. Instead, the consumer can cancel the contract, return the car, and demand return of the full down payment and any trade-in vehicle. (Your contract language may be different than what is discussed here. It is important to review your actual vehicle purchase contract, including the fine print on the back.)

Troy Thomas Gorman | Jan 14, 2019

How the Lemon Law works: Get rid of that bad car or truck!

What makes a vehicle a "lemon". There are two separate ways to violate the Lemon Law: 1. Your new vehicle was serviced at least 3 times for a similar problem. or 2. The vehicle is at the dealership for repair work at least 25 days in the first year that you own or lease it. What am I entitled to if I have a lemon? If your vehicle qualifies under the Lemon Law, the manufacturer (GM, Ford, Toyota, etc.) will be required to "repurchase" the vehicle from you. Basically, this means that you will return the vehicle at the dealership, and you will get your money back - including having the loan or lease paid. You and the manufacturer do have the "option" to agree to exchange the defective vehicle for a new vehicle. How do you get help with a Lemon Law claim? The Lemon Law was created to make sure that consumers could make a claim, without having to go broke dealing with a large vehicle manufacturer. As such, the Lemon Law makes the manufacturer pay all of the attorney fees and costs for the consumer when the vehicle is repurchased or replaced. How does the Lemon Law lawyer help you? A Lemon Law lawyer will first make sure that your vehicle qualifies under the Lemon Law, including sending the required repair "notice" that is required to make a Lemon Law claim. If the vehicle does qualify, the lawyer will contact the manufacturer and notify them of the Lemon Law violation, and will work to convince the manufacturer to repurchase the vehicle. If the manufacturer agrees to do so, the lawyer will facilitate the vehicle repurchase to make sure that the consumer receives the purchase or lease money that they are entitled to, and that the vehicle is properly accepted as "returned". Manufacturers and dealership will often try to take advantage of consumers who are not familiar with how the law or the process works, so it is always best to have legal help from an experience Lemon Law lawyer - especially since the Lemon Law makes the manufacturer pay your attorney. All lawyers do not operate the same way, so you should find out, up front, if the lawyer plans to charge you personally, or will wait to be paid by the manufacturer.