Buying a lemon could impact the loan

On Behalf of | Feb 22, 2021 | Lemon Law |

Those who buy new vehicles or ones under warranty unfortunately sometimes find that the car or truck does not work right. Subsequent trips to the dealership can lead to increased levels of frustration if the problem persists. Fortunately, after a reasonable number of attempts to fix the vehicle, the state and federal Lemon laws enable buyers to get a refund (possibly with some additional incidental damages) or a suitable replacement.

What about the loan?

Few pay cash for newer vehicles – interest rates on loans is generally reasonable if the buyer has good credit – so the owner may wonder what happens to the loan if they bought a defective car. Regardless of the vehicle’s functionality, the owner must keep paying their car loans even if they are negotiating for a new car or money back. If the owner does not make those payments, the dealer or lender in charge of the loan may end up repossessing the vehicle. If this happens, the owner could lose rights guaranteed by the Lemon law.

If the buyer did not ask about the lender’s protocols if the vehicle is a lemon, some experts recommend calling the lender and ask them what they do when the buyer pursues a Lemon law claim.

Cash refund for the vehicle

In this situation, the manufacturer will likely pay the balance of the loan. The owner may still be responsible for a reduction in the lemon vehicle’s value because of high mileage, or the loan was for more than the value of the lemon, so the lender would need to pay the difference. They may also charge fees for the cancellation of the loan.

Replacement vehicle

The lender may not have an obligation to offer the same loan terms for the new car as they did for the lemon. Similarly, the dealer may have offered a deeply discounted price on the lemon, which they may not be obligated to repeat with the replacement car.

Everything is negotiable

Owners of a vehicle that qualifies for Lemon law protection often count on guidance provided by lawyers who specialize in this area of law. These legal professionals can argue for their client to get a refund or a new vehicle, plus damages. They can also help negotiate terms so the owner is less likely to be stuck with undue expenses for a problem created by the manufacturer’s faulty product.