What is the Lemon Law?
If your new car has been in the shop too often, or otherwise suffered from substantial defects, you may be protected by your state lemon law.
Published on February 3rd, 2021. Last Updated on .
Understanding the Lemon Law
All 50 states have laws that protect buyers of new cars. They are often known by names such as The New Motor Vehicle Warranties Act. They vary from state to state so what follows here is a generalization. Most lemon laws cover brand new cars or trucks for a set period of time. If the car has a defect that cannot be repaired under warranty during that time, the manufacturer must buy the vehicle back or replace it.
Some states do not cover anything but cars and passenger vehicles. Other states cover RVs or larger trucks. A few states cover used cars but that is less common, and in those situations, the remedies for the consumer might not be as good as what the lemon law offers. If you are in a state with a lemon law that does not cover your product, you might still have coverage under a Federal law called the Magnuson-Moss Warranty Act.
The typical Lemon Law stipulates that the car buyer is entitled to a remedy if one or two of these circumstances occur:
- The car is out of service for a set number of days in the first year, usually around 30, and it remains defective.
- The car is serviced a set number of times for the same problem, usually three or four within a set time frame, and it remains defective. Typically, the problems must occur within the first 18 months or two years of ownership. Or,
- The car suffers a set number (less than #2) of catastrophic defects – such as brake failure – and remains defective. #3 is the one that is adopted by fewer states. For example, Michigan does not have this.
A Typical Example
A man buys a car and the engine fails. The shop has it for 35 days to repair because they are "waiting for parts." We have a lemon. Or, the engine fails, is repaired, fails again, is repaired . . . when you hit your state's magic number, you have a lemon.
What qualifies as a defect under the lemon law? Again, this will vary from state to state. Most states say that the defect or condition must "substantially impair" the use, value or safety of the vehicle. Some defects are obvious (no-start, engine failure, transmission failure, etc.) while others fall in a gray area (wind noise, water leaks, excessive tire wear, etc). There is no bright line on this so you may need to speak to an attorney.
Most states require you to write a Last Chance Letter to the manufacturer to notify them of the impending lemonhood of the car. This letter goes to the manufacturer and not the seller. Lemon Laws make the manufacturer step up and take care of this. You can usually send the last chance letter before your car outright qualifies. In Michigan, you can send the letter after the car has been in the shop 25 days in the first year or three times for the same problem. You send the letter and the manufacturer usually ignores it. But, if they offer to fix the car one last time, you let them try. They will fail. If they knew how to fix it, it would have been fixed long ago.
However, as noted above, the defect must continue to exist for your car to qualify. If it gets repaired and stays repaired then you don't have a case. If the last repair, however, does not "take," then you are in business. I have had potential clients who suddenly realized that their car – after the tenth or fifteenth repair attempt – might be a lemon. They call and tell me that the car is now running fine. The last repair did it. At that moment, they have no case. If they had called a few repairs back that would have been quite different. The problem must still exist for the vehicle to qualify.
A Qualified Lemon
When your car qualifies as a lemon, you are entitled to a replacement (a non-defective car of equal value) or to have the car bought back (or, if a lease, to have the lease canceled and unwound). A refund entails the money you put into it, less a mileage offset, usually for the mileage you put on the vehicle before the first repair attempt. In Michigan, the law prorates the value of the car over 100,000 miles so you lose 1% of the purchase price for every 1,000 miles you drove before that first repair. You will also be charged mileage for any miles over 25,000 if the car makes it that far. If the vehicle is being financed, the loan will be paid off and the law requires the bank to cooperate with the transaction. The laws in most states also require the manufacturer to pay the consumer’s attorney fees and court costs.
As a practical matter, many cases settle for cash. The manufacturer offers the consumer money to go away and for attorney's fees. If the consumer is paid enough to make it worth his or her while, this will often make everyone happy. Manufacturers prefer to not buy back vehicles because of the ramifications of having to dispose of them which is another story altogether.
In a successful action, your attorney fees and court costs will usually be paid by the manufacturer. The language on whether fees and costs are permissive or mandatory also varies from state to state. That is how most attorneys can afford to take these cases. Otherwise, many consumers couldn't afford to pursue these cases.
Preparing Your Case
In light of the above, here is what you need to do if you are a new car buyer.
- Save your purchase documents.
- If the car acts up, bring it to the dealer and make sure they write it up properly.
- Get a copy of the repair order and save it. I have had great cases that were severely harmed by a client who brought a car in and was told, "It was covered by warranty. You don't need an RO."
Some states make you go through a state mechanism first – like an arbitration process – before you can file suit. Other states have punitive damages for a successful action. But, as I tell my clients, the courts aren't here to make you rich; they are here to make you whole. The goal is to unwind the deal and get you back to square one. If you think you have a lemon, do a few minutes of research and find an attorney in your state who specializes in this. Ask around. Ask the attorney how many of these suits they have filed. Attorneys who handle these cases WILL talk to you for free because if the case is good and worth taking, they will be paid for their work at the end by the manufacturer. And when you call the attorney's office, make sure you are speaking to an attorney. Some offices let clerks, paralegals or secretaries "screen" incoming calls. If the attorney won't speak to you directly, keep looking. (There is an easy test for this: Ask the person you are speaking with "Are you an attorney?")
Still have some questions or want to learn more? Here is a video by the author that goes into even more detail on lemon laws:
