Lemon law cash-and-keep offer in California: what to consider
When a car has been back to the dealer repeatedly, some manufacturers respond to a complaint with a “cash-and-keep” offer: a payment, sometimes with an extended warranty, in exchange for keeping the vehicle and giving up further claims. That can be a reasonable outcome for some owners, but it is worth understanding what you may be giving up before you accept.
What California’s lemon law generally provides
Under the Song-Beverly Consumer Warranty Act, if a manufacturer or its dealers cannot fix a covered warranty defect that substantially impairs a new vehicle’s use, value, or safety after a reasonable number of attempts, the manufacturer generally must either replace the vehicle or repurchase it. A repurchase, often called a buyback, generally refunds the price paid or payable, including collateral charges such as sales tax, license, and registration fees, plus certain incidental damages, less an offset for the miles driven before the first repair visit for the problem. If the buyer prevails, the law generally requires the manufacturer to pay the buyer’s reasonable attorney fees and costs. See how a lemon law buyback is calculated.
How a cash-and-keep offer differs
- You keep the car, including the defect if it is never fully fixed.
- The amount is negotiated, not set by the buyback formula, so it may be much less than a repurchase would be.
- You will usually sign a release. Releases often waive your right to a buyback or replacement for that defect, and sometimes for any claim related to the vehicle.
- The title is generally not branded. Vehicles repurchased under the lemon law in California must carry a “Lemon Law Buyback” title notation when resold. A cash-and-keep settlement usually does not affect your title, which some owners prefer, but the car’s resale value may still be affected by its history.
Questions to ask before you sign
- What exactly am I releasing? Read whether the release covers only the reported defect or every claim about the car.
- Is the defect actually fixed? If it keeps coming back, a payment may not make up for a car you cannot rely on.
- How does the offer compare with what a repurchase might be worth given your price, loan, and mileage?
- What happens to the warranty? Confirm in writing whether the existing warranty continues and whether any extended coverage is included.
- Are there tax or loan effects? If you have a loan or lease, the payment generally does not reduce it unless you apply it yourself.
- Is there a deadline? Offers sometimes have short acceptance windows. You generally are not required to accept on the spot.
Keep building your records
Whatever you decide, keep every repair order, your purchase or lease contract, and all letters and emails with the manufacturer. Write down any offer in full, including the amount and the release terms. See what to do if the dealer can’t fix your car and does my car qualify under California lemon law.
Think your car may be a lemon? An attorney can review your repair history for free, with no obligation. The manufacturer pays attorney fees if you win, so there is nothing out of pocket for you.
General information only, not legal advice. Every situation is different, and no particular outcome is guaranteed.
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