Sometimes people take a loan out to buy something. The buyer subsequently sees a devaluing of the purchase, which can mean that the money owed is more than the value of the purchase. People commonly see this when the housing market collapses, and they are left with an underwater mortgage, but it can also happen to consumers who buy vehicles. In the case of vehicles, it is called negative equity. This occurs when the amount paid for the car or owed on a car loan is more than the car’s bluebook value. For example, if the buyer paid $50,000 with $5,000 down and made three $500 monthly payments for an SUV subsequently valued a few months later at $37,000, the negative equity is $6,500.
How does it affect a lemon vehicle?
The vehicle owner who files a lemon law claim may find that the manufacturer is willing to buy back the vehicle for $37,000. Unfortunately, they still owe $43,500 on the loan, so there is that $6,500 of negative equity to address. The manufacturer may argue that it does not have to pay that negative equity because it’s not their choice to get that loan.
What can the owner do?
The owner still has options. They can trade in the lemon for another vehicle with the same value that is not a lemon, but before agreeing to pay that $6,500 for the dealer to take the lemon, it is wise to discuss options with a lemon attorney. A lawyer who specializes in consumer defects involving cars and trucks as well as motorcycles, boats, RVs, ATVs and other motorized vehicles, these legal professionals may be able to help the client get a better deal that may even include additional damages that can more than cover the negative equity. Moreover, the manufacturer pays the legal fees as part of the settlement.