How does the lemon law affect a car loan?

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The purchase of a new car often means negotiations with dealers and lenders, adjustments to auto insurance policies, and seemingly endless papers to sign. Nevertheless, it may be worth it to drive home in a worry-free car. However, what happens when the owner of a new vehicle is forced to return to the dealer for multiple repairs? That owner may wonder how California lemon law will affect his or her car loan.

Lemon laws protect consumers from defective vehicles. After purchasing a new car, if the owner takes it back to the dealer numerous times for the same repair within a short period of time, that car may be a lemon. Although the average consumer may have to go through arbitration or litigation to get satisfaction, successful legal action may result in receiving a replacement or refund for the car.

Of course, it will not be as easy as exchanging a damaged article of clothing or returning a defective electronic. For those who have taken out a loan, the refund for the balance of the loan will likely go directly to the lender. Additionally, if the consumer has put considerable miles on the car or if it has depreciated in other ways, that amount may be offset, and the buyer will be responsible for paying it. However, the refund may include collateral fees such as registration, taxes, insurance and other costs.

The buyer may choose instead to take a replacement, which should be the same or similar type of vehicle as the defective one. In this case, the buyer's lender may require the buyer to refinance the replacement car. The dealer may also expect the buyer to pay the same offset costs as for the refund option.

Dealing with a lemon can be frustrating and time-consuming. Car dealers are not eager to negotiate a refund or replacement, and consumers may feel they have few options. However, seeking advice from an attorney can be a wise decision. An attorney with experience handling all aspects of the California lemon law can provide a decided advantage to consumers.

Source: thebalance.com, "Buying a Lemon Car and Car Loans", Emily Delbridge, Accessed on Nov. 12, 2017

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