Lemon Law
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Lemon Law Remedy Calculation Guideline

The following information is provided as a guideline to assist consumers in estimating the amount a consumer might recover if a refund or a replacement motor vehicle is awarded under the Lemon Law. The information is provided as a guide, only, and does not constitute a guarantee of entitlement to any relief under the law. Whether the consumer is entitled to a remedy under the Lemon Law, and the amount of any such remedy, is determined by the New Motor Vehicle Arbitration Board on a case-by-case basis. The consumer and manufacturer may also agree, before the arbitration hearing, to a remedy that may be more or less than what is calculated using this guideline. This is a general guideline only, and may not apply to every situation.

CALCULATING THE REASONABLE OFFSET FOR USE: The Lemon Law charges the consumer an offset for their use of the vehicle, which is based on the mileage the consumer has put on the vehicle up to the date of a settlement agreement or an arbitration hearing, whichever occurs first. In the case of a refund award, the cash awarded to the consumer is reduced by the amount of the offset. In the case of a replacement vehicle award, the consumer will have to pay the offset to the manufacturer to obtain the replacement motor vehicle.

Formula: Base selling or sale price as reflected on the purchase invoice, excluding taxes, government fees, and dealer fees, or in the case of a lease, the Agreed Upon Value as reflected in the Lease Agreement (reduced by any manufacturer rebate to the consumer) multiplied by Mileage attributable to the Consumer (subtract mileage at delivery and other non-consumer mileage) up to the date of settlement or an arbitration hearing, divided by 120,000 (60,000 if the vehicle is a recreation vehicle).

Examples of "other non-consumer mileage" include, but are not limited to: test drives by the service agent during the course of repairs, by the manufacturers during pre-arbitration vehicle inspections, by independent inspectors of manufacturer-sponsored informal dispute settlement programs, by decision-makers of manufacturer-sponsored informal dispute settlement programs and by the New Motor Vehicle Arbitration Board during state-run arbitration hearings, etc.

EXAMPLE: (non-RV): If your base selling/sale price was $24,000.00 and your mileage at the applicable date was 20,000 miles, your offset would be $4,000.00.

EXAMPLE: (RV): If your base selling/sale price was $50,000.00 and your mileage at the applicable date was 10,000 miles, your offset would be $8,333.33.

IF YOU ARE SEEKING A REFUND, the refund is calculated depending upon whether you financed the purchase, leased the vehicle or paid cash. Each of these is addressed below.

IF YOU FINANCED THE PURCHASE OF YOUR VEHICLE, by borrowing all or a portion of the purchase price, your finance institution (e.g. bank, credit union or finance company) may have a lien on the vehicle. The Lemon Law states that, in these situations, if a refund is awarded, the consumer and the lienholder (bank, credit union or finance company) shall be paid as their interests may appear. This usually means that the consumer is awarded the amounts paid by the consumer toward the purchase of the vehicle, reduced by the offset for use, and the loan on the vehicle is paid off by the manufacturer. The following are examples of items that may be recoverable by the Consumer:

    1. The amount of any cash down payment (Note that if the down payment is, in whole or in part, a manufacturer rebate, the portion that is a rebate usually will not be included in the consumer’s award, but may be utilized to reduce the offset charged to the consumer););

    2. The amount of periodic payments (principal and interest) made on the loan up to the date of repurchase of the vehicle by the manufacturer (usually, late fees and other penalties are not reimbursed);

    3. The amount of any reasonable "collateral charges" in addition to the cash down payment (costs wholly incurred as a result of the acquisition of the vehicle) that were not financed (e.g. window tinting, government fees, extended warranty, additional items installed in/on the vehicle, etc.). You should have some documentation or other proof of the amount paid, such as canceled checks, receipts, invoices, etc.

    4. The amount of any allowance for a trade-in vehicle. This means the net trade-in allowance in the purchase agreement, if this is acceptable to the consumer and manufacturer. If this amount is not acceptable, then, 100% of the retail value of the trade-in vehicle as depicted in the NADA Official Used Car Guide (Southeastern Edition) in effect at the time of the trade-in. The Manufacturer must produce the applicable NADA guide.

IMPORTANT NOTE ABOUT TRADE-IN ALLOWANCES: If you traded in a vehicle on which you owed a debt to a lienholder, and the dealer "inflated" or increased the allowance for your trade-in to account for this debt, the manufacturer may not accept the net trade-in allowance on your purchase agreement. In this event, the Arbitration Board will look to the retail value of the trade-in vehicle, as reflected in the NADA Official Used Car Guide (Southeastern Edition) which was in effect at the time of your trade-in, and that figure will be reduced by the amount of debt you owed on your trade-in vehicle when you traded it in. If the NADA Guide provides for increasing the retail value for such things as low mileage, and specified accessories, and your trade-in vehicle had these items, the Board may utilize the higher retail value. Use of the NADA Guide in these circumstances could result in your trade-in allowance being a negative amount, which may further reduce the amount of money awarded to you.

On the other hand, if you traded in a vehicle on which there was minimal, or no debt remaining, and the net trade-in allowance given by the selling dealer was less than the retail value in the NADA guide, use of the NADA retail value may increase the amount of money awarded to you. Some research on this issue prior to entering into settlement negotiations or prior to an arbitration hearing might assist you in making an informed election with regard to your trade-in allowance. You should inquire of your local public library whether they have the correct edition of the NADA Guide. If you have a pending arbitration claim, you may also request the Manufacturer to produce a copy of the page(s) of the guide applicable to your trade-in vehicle.

    5. The amount of any reasonable "incidental charges" (e.g. postage, long distance calls, rental car, towing, warranty deductibles or repair charges, etc.) incurred as a direct result of the nonconformity (defect or condition that substantially impairs the use, value or safety of the vehicle). You should have some documentation or other proof of the amount paid, such as canceled checks, receipts, invoices, etc.

To arrive at a total, add the amounts in numbers 1 through 4, above (if your trade-in allowance is a negative, the effect will be to subtract that amount), then, subtract the offset for use, and then add the total of any amounts in number 5. This should give you an estimate of your portion of a refund. The Manufacturer should pay the lienholder (your lending institution or finance company) the balance owed or payoff on the loan as of the date the vehicle is repurchased by the Manufacturer.

IF YOU LEASED YOUR VEHICLE, then you are the "lessee" and the entity to which you send your payments every month is, most likely, the "lessor." The Lemon Law states that refunds shall be made to the lessor and lessee as follows: the lessee shall receive the "lessee cost" (which is the aggregate deposit and rental payments previously paid by the lessee) and the lessor shall receive the "lease price" (which is defined in the statute) less the lessee cost. The lessor shall not charge a penalty for early termination of the lease. In layman’s terms, the consumer/lessee’s portion of the refund may consist of:

    1. The amount of any security deposit paid at lease signing;

    2. Other costs paid out-of-pocket to obtain the lease (e.g. service fees, pro-rated taxes, government fees, first monthly payment in advance, etc.);

    3. Total amount of lease payments (in addition to a first month’s payment made in advance at lease signing) made as of the date of repurchase of the vehicle;

    4. The amount of any allowance for a trade-in vehicle. (See Number 4 in the "If You Financed the Purchase of Your Vehicle" section and the "Important Note About Trade-in Allowances." All of those provisions apply to lease transactions);

    5. The amount of any reasonable "collateral charges" (costs wholly incurred as a result of the acquisition of the vehicle) that were not included in the amounts paid at lease signing or incorporated in your monthly lease payments (e.g. window tinting, government fees, extended warranty, additional items installed in/on the vehicle, etc.). You should have some documentation or other proof of the amount paid, such as canceled checks, receipts, invoices, etc.

    6. The amount of any reasonable "incidental charges" (e.g. postage, long distance calls, rental car, towing, warranty deductibles or repair charges, etc.) incurred as a direct result of the nonconformity (defect or condition that substantially impairs the use, value or safety of the vehicle). You should have some documentation or other proof of the amount paid, such as canceled checks, receipts, invoices, etc.

To arrive at a total, add the amounts in numbers 1 through 5, above (if your trade-in allowance is a negative, the effect will be to subtract that amount), then, subtract the offset for use, and then add the total of any amounts in number 6. This should give you an estimate of your portion of a refund. The Manufacturer should pay the lessor the "lease price" less the aggregate deposit and lease payments previously paid by you.

IF YOU PAID CASH TO PURCHASE YOUR VEHICLE: Your refund may include the following:

    1. Total cash paid to acquire the vehicle, reduced by any manufacturer rebate, if applicable;

    2. The amount of any allowance for a trade-in vehicle. (See Number 4 in the "If You Financed the Purchase of Your Vehicle" section and the "Important Note About Trade-in Allowances.")

    3. The amount of any reasonable "collateral charges" not included in the cash paid to acquire the vehicle (costs wholly incurred as a result of the acquisition of the vehicle, e.g. window tinting, extended warranty, additional items installed in/on the vehicle, etc.). You should have some documentation or other proof of the amount paid, such as canceled checks, receipts, invoices, etc.

    4. The amount of any reasonable "incidental charges" incurred as a direct result of the nonconformity (defect or condition that substantially impairs the use, value or safety of the vehicle, e.g. postage, long distance calls, rental car, towing, warranty deductibles or repair charges, etc.). You should have some documentation or other proof of the amount paid, such as canceled checks, receipts, invoices, etc.

To arrive at a total, add the amounts in numbers 1 through 3, above (if your trade-in allowance is a negative, the effect will be to subtract that amount), then, subtract the offset for use, and then add the total of any amounts in number 4.

IF YOU ARE SEEKING A REPLACEMENT VEHICLE, the Lemon Law defines a "replacement motor vehicle" as a motor vehicle which is identical or reasonably equivalent to the motor vehicle being replaced, as the motor vehicle being replaced existed at the time of acquisition. "Reasonably equivalent to the motor vehicle to be replaced" means the manufacturer’s suggested retail price (MSRP) of the replacement vehicle shall not exceed 105 percent of the MSRP of the vehicle being replaced. In the case of a recreation vehicle, the retail price of the replacement recreation vehicle shall not exceed 105 percent of the purchase price of the recreation vehicle being replaced. IMPORTANT: If your vehicle was leased, or if you purchased it with financing and you still owe on your loan, you should contact your lessor or lender to find out whether you will be able to "swap" your original vehicle for the replacement vehicle under your existing lease or loan, and if you will incur additional costs. If you have a lease, the lessor cannot charge you an early termination penalty for the replacement vehicle. In addition to the replacement vehicle, you may also recover the following:

    1. The amount of any reasonable "collateral charges" (costs wholly incurred as a result of the acquisition of the vehicle, e.g. earned financed charges (interest paid on your loan or lease as of the date of repurchase), sales tax, government fees, window tinting, extended warranty, additional items installed in/on the vehicle, etc.). You should have some documentation or other proof of the amount paid, such as canceled checks, receipts, invoices, etc.; and/or

    2. The amount of any reasonable "incidental charges" incurred as a direct result of the nonconformity (defect or condition that substantially impairs the use, value or safety of the vehicle, e.g. postage, long distance calls, rental car, towing, warranty deductibles or repair charges, etc.). You should have some documentation or other proof of the amount paid, such as canceled checks, receipts, invoices, etc.

REMEMBER that you will have to pay the Manufacturer the "reasonable offset for use."