How a Lemon Law Buyback Is Calculated

Our client’s recoveries under California’s lemon law, the Song-Beverly Act consist of two components: (1) a Lemon Law Buyback (or “Buyback”); and (2) Civil Penalties, which can equal up to two-times the Buyback (learn more about the Civil Penalties here).  This article’s purpose is to explain how the Buyback is calculated.  

The Buyback allowed under the Song-Beverly Act includes “restitution” plus “incidental and consequential damages.”  In the case of a Buyback under Breach of Express Warranty, the manufacturer is also entitled to deduct a mileage offset.  For a Buyback under Breach of Implied Warranty, the manufacturer is not entitled to a mileage offset (and the consumer is not entitled to recoup civil penalties).  For a recover under either Breach of Express or Implied warranty, the manufacturer must pay the consumer’s attorneys’ fees.  

The statute, Civil Code section 1793.2(d)(2)(B) provides that, “the manufacturer shall make restitution in an amount equal to the actual price paid or payable by the buyer, including any charges for transportation and manufacturer-installed options, but excluding nonmanufacturer items installed by a dealer or the buyer, and including any collateral charges such as sales or use tax, license fees, registration fees, and other official fees, plus any incidental damages to which the buyer is entitled under Section 1794, including, but not limited to, reasonable repair, towing, and rental car costs actually incurred by the buyer.”  Let’s break this down a bit.  

Generally, this means a consumer is entitled to recover:

  • The down payment (and/or any equity on a trade-in); 
  • All monthly payments (including all paid principal and interest); and
  • The vehicle’s outstanding loan balance (usually, paid directly to the bank).
  • Sales tax, license fees, registration fees, and other official fees are included in this amount.  

Deducted from this total are:

  • Non-manufacturer installed items, such as surface protection and third-party accessories;
  • Third-party service contracts are generally not recoverable (although service contracts sold by the manufacturer generally are recoverable); and
  • Gap insurance sold by third-parties generally is not recoverable;

The consumer also is entitled to recover incidental and consequential damages, which include costs incurred because the vehicle was not usable, such as:

  • Rental car fees;
  • Costs of a replacement vehicle;
  • Costs of public transport;
  • Repair costs incurred outside of warranty; and
  • Other costs resulting from the vehicle being unfixable.

Under Breach of Express Warranty, manufacturer is entitled to a credit for the time the vehicle was used without issue, known as the “Mileage Offset.”  The Mileage Offset is calculated using a formula based on how many miles the vehicle was driven before it was first brought in for repair, “X”.  The Mileage Offset is calculated using the below formula:

Mileage Offset=(X/120,000)(Purchase Price)

This figure gets deducted from the total of restitution and incidental and consequential damages to calculate the Lemon Law Buyback.  For instance, if the first repair is at 60,000 miles after purchase, the Mileage Offset will be large, equal to roughly half of the purchase price of the vehicle.  If the first repair occurs early on, for instance at 3,000 miles, the Mileage Offset will be small or negligible.   

In short, the Lemon Law Buyback formula looks like this:

(Total Paid or Payable for the Vehicle)

+(Incidental & Consequential Damages)

– (Mileage Offset)                                                  

= Buyback

As you can imagine, there is some subtilty to these calculations and each case is different.  For a free consultation with an expert Lemon Law attorney that can advise you about your potential Lemon Law recovery, please call CCA today: (833) LEMON-FIRM.