California’s lemon laws are among the most important protections new car owners have. These laws ensure that if your vehicle has a genuine manufacturing defect, the carmaker must either repair, replace, or refund it. There are several ways that lemon claims can be settled, but one of the most well-known is the cash-and-keep settlement.
While cash-and-keep offers might seem like a good deal, you shouldn’t blindly accept them. Manufacturers offer these lemon settlements because they’re the cheapest solution, not because they’re best for you, the consumer. Here’s what you need to know about these settlements, why they’re offered, and how to ensure you get the best deal for your defective car.
What Is a Cash-and-Keep Settlement Offer?
The name says everything you need to know about cash-and-keep settlements. The manufacturer offers a flat, one-time sum to compensate you for the defects and lets you keep the vehicle. In return, you agree to release them from responsibility for repairing the problems.
The amount offered depends on the car’s original value, the type of problem, and the amount of trouble and hardship you have experienced because of it. For example, if the issue is cosmetic, like paint that keeps peeling no matter what you do, the settlement may be a few thousand dollars and your attorney fees. In contrast, for a more serious issue like a battery with seriously reduced range in an electric car, the sum could be as much as half the vehicle’s value to account for how much it has depreciated.
Why Do Carmakers Offer Cash-and-Keep Deals?
These offers are typically made because the manufacturer acknowledges that your car is a genuine lemon and it wants to avoid the cost of buying it back or replacing it. The text of the offer may not state this directly, though. Instead, the offer may be presented as your best option to halt lengthy litigation.
However, just because the manufacturer has offered a settlement does not mean you must accept it. These offers are just one of three potential positive outcomes from lemon claims. The other two are replacements or buybacks.
Manufacturer buybacks are similar to cash offers but not the same. You don’t get to keep your car when the manufacturer buys it back. Instead, you receive the full sale price of the vehicle minus reasonable depreciation, and your legal fees are covered. You may also receive compensation for any repairs you made. You can use the funds to pay off your car loan or buy a new, non-defective vehicle of your choice.
Meanwhile, replacements are simple. The manufacturer covers your legal fees and replaces your defective vehicle with one of equivalent value. This will usually be a car of the same model and color, though it may be a more recent year.
If your car qualifies as a lemon, you, the consumer, get to pick whether you want cash, a buyback, or a replacement. Furthermore, even if you’d prefer the money, you have room to negotiate a better settlement instead of accepting the manufacturer’s first offer.
Pros and Cons of Quick Cash Settlements for Lemon Claims
If you’re preparing for a lemon claim, you should be ready for the manufacturer to offer a cash-and-keep deal. These offers can be worthwhile in certain circumstances, but they also have serious risks.
The benefits of a cash settlement are obvious:
- You get cash fast, usually in the form of a check that you can deposit immediately.
- You get to keep the same car, so there’s no need to change your insurance or notify the DMV or your loan provider.
- There are no lengthy negotiations about how much your car has depreciated or what year model is an appropriate replacement.
In short, cash offers are simple. However, this simplicity hides some drawbacks:
- You filed a lemon claim in the first place because your car is defective. Now you’re stuck with that defect for the life of the vehicle or your lease.
- If the defect affects its performance or safety, you’re putting yourself at risk whenever you drive it.
- The car is likely worth significantly less than it would be otherwise, so you might be underwater on the loan.
For these reasons, it’s usually best to at least consider a replacement or buyback instead when you’ve purchased a defective car. These options allow you to get rid of the potentially dangerous vehicle and start driving something safe and functional.
If you choose a buyback, you’re almost certain to get more money than you would with a cash-and-keep offer. You can use those funds to pay off your car loan, and you will often have some money left over, even after depreciation is considered.
If you lease, then a cash deal may be more appealing. Leases typically only last for two to three years. The cash settlement offer may be lower, but you won’t be stuck with a dangerous or unreliable vehicle like you would be with a car you purchased.
How to Choose the Right Settlement for Your Lemon
A cash settlement is not always the right choice. It’s wise to think carefully before accepting any settlement offer made by a big corporation. Signs that a cash-and-keep offer may be the best option include:
- You are comfortable with continuing to drive your car despite the defect.
- The defect does not put you in danger.
- You want the fastest option, not necessarily the best deal.
If you disagree with any of the options above, a cash-and-keep settlement may not be the right choice. If you’re still not sure what option is best, your California lemon lawyer can walk you through the specific benefits and drawbacks of your settlement offer.At Johnson & Buxton — The Lemon Law Guys, we can help you get the best possible settlement for your defective car. Don’t waste another day driving a vehicle that doesn’t work. Instead, get in contact with us today to discuss your situation and learn how we can help you get the money you deserve for your lemon.