So, you have a defective vehicle that qualifies as a “Lemon.” What is your remedy? How much money do you get? What happens to the finance contract? Under Michigan's Lemon Law the answers to these questions depend on how much you paid, whether you have additional “out of pocket” damages, and how many miles are on the odometer, among other things.
- Return of Your Purchase Price or Lease Price
Michigan's Lemon Law at MCL 257.1403(1)(a), permits recovery of either a replacement vehicle or the purchase price of your defective vehicle:
“The manufacturer must either replace the new motor vehicle with a comparable replacement motor vehicle currently in production and acceptable to the consumer or accept return of the vehicle and refund to the consumer the purchase price.”
Under section MCL 257.1401(l), “purchase price” means:
. . . the actual vehicle sales price listed on the buyer's order including any cash payment by the consumer and the sum equal to any allowance for any trade-in but excludes debt from any other transaction as well as any manufacturer to consumer discount, rebate, or incentive appearing in the agreement or contract that the consumer received or that was applied to reduce the purchase cost. Additionally, any sales tax, license and registration fees, and similar government charges not included elsewhere paid by the consumer are included as a part of purchase price.”
- Payoff of Finance or Lease Balance
If you financed or leased your vehicle, part of the purchase price refund will be provided to the finance company to satisfy the balance of your loan or lease:
A refund required under this subsection or subsection (1) shall be made to the consumer and the secured party, if any, as their interests exist at the time the refund is to be made. The lessor, if any, shall be notified if a refund is made to a lessee under this act. A lessor shall not assess a fee for early termination of a lease under this act.
You will be specifically required to provide the current payoff amount of your loan or lease in connection with the repurchase process.
- Towing and Rental Costs
MCL 257.1403(2) also provides for additional damages:
“. . .if towing services and rental vehicles were not made available without cost to the consumer, the manufacturer shall also reimburse the consumer for those towing costs and reasonable costs for a comparable rental vehicle that were incurred as a direct result of the defect or condition.”
- After Market Items
Let's say you purchased a performance intake or exhaust, or a bed liner or another after-market accessory. Will you be reimbursed? The only language in the Lemon Law regarding modifications is limited:
“The purchase price or lease price includes the cost of any options or other modifications installed or made by or for the manufacturer. . .” MCL 257.1403(2)
So it would seem that only manufacturer-approved and installed items would be reimbursed. In practice, my clients have been reimbursed for all sorts of after-market items, some of which were not installed by the dealer. The answer actually depends on the type of item, the age of the item and where you bought it. Generally, after-market items purchased from and installed by an authorized dealer will be reimbursed. If the item is easily removable, you may be asked to simply remove and keep it yourself. Non-conforming items that potentially void your warranty will be more difficult. In sum, the reimbursement of after-market items is part of the negotiation that your attorney will engage in to provide you the best possible settlement. Of course, you will have to provide the receipt for any after-market item if you expect to be reimbursed.
- Extended Warranties, GAP Insurance, Credit/Disability Insurance
Extra insurance and warranties are not specifically discussed in Michigan's Lemon Law. But MCL 257.1403(2) generally provides for recovery of:
“. . . the amount of all other charges made by or for the manufacturer. . .”
These “charges” are understood to mean both finance charges and extra warranty and insurance coverage. Accordingly, these items are going to be reimbursed, either in part or in whole. Generally, you will receive the pro-rated refund for any unused portion of any extended warranty. And you should be fully reimbursed for any insurance you arranged at the time of purchase through the selling dealer. Notably, some manufacturers like to haggle on these items and offer less than full value. We have been successful on most occasions in recovering 100% of the outlay for extras. This also includes extras such as Scotchgard, rustproofing, fabric protection and paint protection.
- Attorney Fees
One important feature of the Michigan Lemon Law provision for payment of your attorney fees and court costs:
A consumer who prevails in any action brought under this act may be allowed by the court to recover as part of the judgment a sum equal to the aggregate amount of cost and expenses, including attorneys' fees based on actual time expended by the attorney, determined by the court to have been reasonably incurred by the consumer for or in connection with the commencement and prosecution of such action, unless the court in its discretion shall determine that such an award of attorneys' fees would be inappropriate. MCL 257.1407(2)
- Mileage Setoff
Your recovery may be reduced based on the mileage on your odometer. The Michigan Lemon Law provides a very specific formula for determining the mileage setoff:
A reasonable allowance for use is the purchase or lease price of the new motor vehicle multiplied by a fraction having as the denominator 100,000 miles and having as the numerator the miles directly attributable to use by the consumer and any previous consumer prior to his or her first report of a defect or condition that impairs the use or value of the new motor vehicle plus all mileage directly attributable to use by a consumer beyond 25,000 miles. MCL 257.1403(2)
This calculation is confusing for some. Basically, if you have less than 25,000 miles on your odometer, your mileage setoff is capped at the time of your “first report of a defect. . .” For example, if you initially brought your vehicle for service with 5,000 miles on the odometer, your mileage setoff is capped at 5,000 miles. (This is assuming you don't have more than 25,000 miles on the odometer, total. If you do, you simply add the excess mileage, over and above the 25,000 to the 5,000-mile cap).
Example: Assuming you are responsible for only 5,000 miles, your calculation would look like this:
5,000/100,000 x Purchase Price
The easy way to understand this is that 5,000/100,000 = 5%. If your purchase price was $20,000, your mileage setoff would be 5% of $20,000, or $1,000. Keep in mind that “mileage attributable to use by the consumer” should not include mileage on the vehicle before you purchased it, mileage that the dealer put on it either test-driving it or otherwise, or mileage to and from the service department.
- Glass Damage, Body Damage, Missing Equipment
You will also be docked for any damage to your vehicle that is not “normal wear and tear”. MCL 257.1407(2) indicates that the purchase price is reduced by:
“. . . an amount equal to any appraised damage that is not attributable to normal use or to the defect or condition.”
Door dings, dents, scratches, glass damage or missing items will cost you and be deducted from the repurchase calculations. I always recommend that my clients get these items repaired prior to the repurchase date because it will cost substantially more due to higher dealer repair costs. You should also consider filing an insurance claim for more severe damage.
- Abuse or Neglect
The Lemon Law will not protect you if it is determined that you failed to properly maintain your vehicle or if you had parts installed that caused the defects you are experiencing. MCL 257.1406 covers these potential legal defenses:
This act does not apply to a defect or condition that is the result of either of the following:
(a) A modification not installed or made by or for the manufacturer.
(b) Abuse or neglect of the new motor vehicle or damage due to an accident that occurred after the new motor vehicle was purchased or leased by the consumer.
The most common item that causes vehicle problems is a remote starter. Occasionally, installation of a remote starter will result electrical problems or battery drain that is mistakenly confused with engine defects. High-performance after-market items are also troublesome, and of course if you fail to get regularly scheduled oil changes and/or maintenance, this may adversely impact your Lemon Law claim or recovery.