If your lemon law claim is successful, North Carolina law gives you a choice. You can ask for a repurchase, which is when the manufacturer buys your vehicle back, or a replacement of your defective vehicle with a comparable new vehicle. Most clients come in thinking repurchase is the obvious move, and it often is (especially with some manufacturers), but not always.
Here is what you need to know before you decide.
How a Lemon Law Repurchase Works
A repurchase means the manufacturer refunds the full contract price of your vehicle. That includes everything you paid at signing: the purchase price, dealer prep charges, installed options, and the non-refundable portions of any extended warranties or service contracts. Sales tax, license fees, and registration are also included. So are any finance charges you paid after the first time you reported the defect.
The catch is the mileage offset. The manufacturer gets to deduct a “reasonable allowance” for the miles you put on the vehicle before your third repair attempt or the 20th cumulative business day a one-year period. It could be one repair for one defect that takes twenty business days, twenty different defects taking a day each to fix, or any combination of the two. The formula is:
Miles at 3rd Repair (or 10th day) ÷ 120,000 × Cash Purchase Price = Offset
This amounts to a deduction from your refund of 10% of the cash price of the vehicle for every 12,000 miles. On a $35,000 vehicle with 12,000 miles at the third repair, that comes to $3,500 off your refund. The number grows the longer the repair process drags on, which is one reason acting quickly matters. If you have your first defect at 1,000 miles, second at 2,000 miles, the third shows up the next day, but you wait another 10,000 miles to go back for the third visit because you are irritated at having to go sit in a service waiting area (totally relatable, by the way), that delay would cost you about $3,000.
How a Lemon Law Replacement Works
A replacement means the manufacturer swaps your lemon for a comparable new vehicle with the same or similar MSRP. Your financing carries over through a collateral exchange, which is when your bank releases the title on the old vehicle and attaches its security interest to the new one. Your payments and remaining financing terms stay the same.
The biggest advantage of a replacement over a repurchase is that there is no mileage offset. None. You drive away with a new car, a new factory warranty, and the manufacturer absorbs the full cost. There are some caveats, which we can discuss in another post, but that is basically how it works.
When a Replacement Is the Smarter Move
If you rolled a lot of negative equity from a trade-in into your current vehicle, a repurchase can leave you writing a check at the end. Or a high enough mileage offset can leave you upside down because the manufacturer can take a higher chunk of the purchase price the longer it takes to reach the 3rd repair. If your vehicle has a problem starting a mile 15,000, and the third repair happens at mile 36,000 the lemon law still applies, but the mileage offset would be 30% of the purchase! In that situation, a replacement is almost always the better call.
Choosing between a repurchase and a replacement is one of the most important decisions in a lemon law case. We help clients make this call every day. Call us at 919.981.4475 or contact us online for a free case review.
