Replacement or Repurchase?
At the arbitration hearing you will have to make a final decision whether you want the vehicle replaced or repurchased. If your vehicle is determined to be a “lemon” by the arbitrator, you will be awarded your choice of repurchase or replacement of the vehicle. Once an arbitration hearing is over, your choice or repurchase or replacement cannot be changed by the arbitrator. If there is an award and you have changed your mind, you will need to negotiate directly with the manufacturer as there is no authority for anyone to change the terms of the award.
Note: A manufacturer will not be required to refund, replace or reinstall an item that you added to the defective vehicle after you purchased/leased it. You and the manufacturer are encouraged to negotiate how ‘after market’ add-ons will be dealt with which might include the manufacturer agreeing to buy them from you. Items like a truck canopy added after purchase or lease may be removed. You will not be required to return the vehicle to original condition when the items are removed. You will be required to return or replace any original equipment that was removed from the vehicle for the after-market add-on (e.g. the manufacturer stock radio) if you are removing the aftermarket item.
A consumer is required to repair the vehicle or transfer an insurance claim or settlement to the manufacturer when there is damage that is not reasonable for the amount of use and type of vehicle. See:Compliance and Consumer Requirements When Returning a Vehicle
If you are awarded a replacement vehicle, the vehicle must be new and “identical or reasonably equivalent” to your vehicle as it existed at the time of original purchase or lease including any service contract, undercoating, rustproofing and other factory/dealer options. The manufacturer is responsible for sales tax, license and registration fees. The manufacturer must refund to you any incidental costs or attorney’s fees awarded by the arbitrator.
Before receiving the new vehicle you are obligated to pay the manufacturer an “offset for use” based on the attributable use mileage at the time of first repair of the ‘lemon’ defect and original “purchase price” regardless of whether you are the original or a subsequent owner. You must contact your lender early in the process about how they would deal with your existing loan or lease and a replacement vehicle as you may have to make a new loan at very different terms. If the manufacturer originally offered a special financing deal like a low interest rate the manufacturer is not required to offer those terms for a replacement vehicle.
If you are awarded a repurchase of the vehicle, the arbitrator will determine your refund based on the following:
if you purchased the vehicle: your refund will include the cash price of the vehicle in the sales agreement (minus any manufacturer rebate), collateral charges and incidental costs. If you have a loan balance, the lender will be paid from your refund by the manufacturer;
if you leased the vehicle: your refund will the total of all lease payments that you made, including inception and security deposit payments (not including any manufacturer rebate) , collateral charges and incidental costs. The manufacturer will pay any remaining lease obligations except late payment penalties which are your responsibility.
Note: if you are a second or subsequent owner, a repurchase award will be based on your purchase price - not the original owner’s purchase price.
The following types of items will be included in a refund award for repurchase of leased or purchased vehicles:
“collateral charges” - sales or lease related charges including sales and use tax, finance charges (interest on a loan), dealer preparation and transportation costs, prorated license, registration and title fees, prorated insurance costs based on days out-of-service, nonrefundable portions of credit life and disability insurance, service contracts, undercoating, rustproofing and other factory or dealer installed options purchased when you bought/leased the vehicle.
Note: The following types of items will be refunded in awards of repurchase or replacement:
“incidental costs” - reasonable expenses paid by you related to repairs including costs of towing and obtaining alternate transportation
• legal fees - if the manufacturer was represented by counsel, the arbitrator will also award reasonable costs and attorney’s fees if you were represented by an attorney. If the manufacturer is not represented by an attorney at some point in your contacts with the manufacturer, you cannot be awarded costs and attorney’s fees.
A manufacturer is not required to refund all your costs related to the vehicle or provide a replacement vehicle without cost to you. An “offset for use” is calculated based on your use of the vehicle before a significant defect. The “offset for use” is computed by multiplying the number of miles “attributable to consumer use” (explained in detail below) times the “purchase price” (less any rebate) and dividing by 120,000 (Note: divide by 25,000 for a motorcycle).
“Mileage attributable to consumer use” for cars, truck and motor homes accumulates between the retail delivery date and:
the date of the first attempt to diagnose or repair a defect that causes a manufacturer to be required to repurchase or replace a vehicle; or
the 15th “day out of service” where a manufacturer is required to repurchase or replace a vehicle solely because of accumulated “days out of service” due to diagnosis or repair
of one or more substantial defects.
Note: If you leased the vehicle the “purchase price” is the vehicle’s capitalized cost in the lease agreement.
Example: Based on a purchase price of $24,000 and 10,000 miles “attributable to a consumer’s use”, the “reasonable offset for use” would be:
($24,000) x (10,000 miles) = $2,000
Notes: The ‘offset for use’ calculation for a motorcycle is different from other vehicles. A motorcycle’s ‘offset’ is based on the mileage accumulated through use by a consumer from the retail delivery date through the time the motorcycle is returned to the manufacturer.
-- If you leased the vehicle the “purchase price” is the vehicle’s capitalized cost in the lease agreement.-- If you are a second or subsequent owner, a repurchase offset is based on your purchase price and a replacement offset is based on the original purchase price of the vehicle (as you will receive a new vehicle for the used vehicle you purchased).
IMPORTANT: Be certain that you understand how your “offset for use” will be calculated. If you are awarded a replacement vehicle, you must pay the “offset for use” before receiving the new vehicle. Most consumers are able to add this into the financing for the replacement vehicle – talk to your lender as soon as possible. This may affect your decision whether to choose repurchase rather than a replacement.
If you are awarded repurchase, the “offset for use” will be deducted from your refund before any existing loan obligations are paid. It is possible in situations of large loan balances and high mileage that a refund will not be enough to pay off the loan. The remaining balance would still be your responsibility.