Lemon Laws and Car Loans

Since 1982, states across the country have adopted their own forms of Lemon Law to protect consumers who unknowingly purchase a vehicle with defects. When substantial defects are present, manufacturers must refund or replace the car. It’s a fairly simple process so long as you have quality legal representation.

While the concept is simple, there are variables that can complicate things. One of those is purchasing the car through a loan. So, what happens to your loan during the process and after your claim is won? Here’s everything you need to know about Lemon Laws and car loans.

The Claim Process

Lemon Laws require you to attempt to repair the defect a set number of times or have your vehicle in a repair shop for so many days, whichever comes first. The numbers vary from one state to the next. You also need to document each of those trips, including both the dates and costs.

The defect must be substantial, as well. That simply means that the problem must either decrease the car’s value, pose a safety issue, or affect its operation. There are also mileage and time limits in each state, and the car must be under warranty.

Since each state’s Lemon Laws vary, it’s always in your best interest to hire a legal professional with knowledge of your state’s laws. This San Francisco Lemon Law attorney has an incredible track record, for example.

Your Claim and Your Loan

Once you and your attorney ensure your car meets the requirements and bring the claim forward, all you have to worry about is your loan. While it might seem unfair to have to keep paying on a defunct car, it is vital that you continue to make your loan payments during this time.

Not only will missing payments hurt your credit score, but the vehicle could be repossessed. If that happens, you could lose any rights to a Lemon Law claim. It’s also a good idea to contact your lender, telling them about the claim. They can inform you of what would happen in the event of a replacement or refund.

The Refund

Some states allow you to opt for a refund while it may be the only option in other states. If this is the end result of your claim process, then keep in mind that full purchase price of the vehicle is refunded along with any legal fees you’ve incurred. Taxes, title fees, registration, and more are often included as well.

That refund will go to paying off your loan, and your lender might be entitled to extra in order to cover the cost of cancelling the loan or other fees. In most cases, that means your loan is taken care of and the Lemon Law case will not affect your finances in that regard moving forward.

The Replacement

If the vehicle is replaced instead of refunded, things are more complicated. You’ll need to speak with your lender about the situation and how your loan will apply to the new vehicle. Sometimes that’s as simple as signing new paperwork, other times it means you might lose special financing or discounts. Either way, make sure to work with you attorney and lender to remedy the situation.