What Does the Manufacturer Have to Pay in a Buyback?

When your vehicle qualifies for a California lemon law buyback, the manufacturer does not just hand you back the sticker price and call it even. The law specifies precisely what must be included in a buyback payment — and many consumers are surprised by how comprehensive those requirements are. Here is a complete breakdown of what the manufacturer owes you.

The Full Statutory Buyback Calculation

California Civil Code § 1793.2(d)(2)(B) sets out the components of a lemon law repurchase. The manufacturer must pay:

• The actual purchase price paid by the buyer — the total transaction amount, including the price of the vehicle itself, any dealer-installed options, and all taxes
• All sales tax paid — the full amount of California sales tax you paid at purchase
• All registration and licensing fees — DMV fees paid at the time of purchase and at any subsequent renewals during the period you owned the vehicle
• All finance charges incurred — interest you have paid on any auto loan during your ownership
• Incidental damages — this is the catch-all for out-of-pocket expenses you incurred as a direct result of the manufacturer’s failure to repair the vehicle

From this total, the manufacturer deducts the mileage offset — calculated as (miles at first repair attempt ÷ 120,000) × purchase price. That is the only authorized deduction.

Incidental Damages: Often Overlooked

Incidental damages under Cal. Civ. Code § 1794(a) are broader than most consumers realize. They include:

• Rental car and alternative transportation costs incurred while your vehicle was in the shop for warranty repairs
• Towing charges when the vehicle broke down
• Repair costs at independent shops, if you paid out of pocket for diagnosis or emergency repairs
• Loan payment periods during which you had no use of the vehicle (reinforces your total damages claim)
• Travel costs to and from the dealership for repair attempts, particularly if the dealer is not local
• Storage or impoundment fees if the vehicle was incapacitated and had to be stored

Keep every receipt related to your vehicle’s defect. Credit card statements, bank records, and rideshare receipts all work as evidence of incidental expenses. These amounts are added on top of the buyback total, not deducted from it.

What About Extended Warranties and Service Contracts?

If you purchased an extended warranty or service contract through the dealer at the time of sale, the manufacturer may be required to refund the unused portion of those costs as part of the buyback. These are typically prorated based on the coverage period remaining. Your attorney will ensure these items are included in the demand.

If You Are Underwater on the Loan

Being “underwater” means you owe more on your auto loan than the buyback amount covers. This situation can arise when a large amount was financed with a long loan term and the buyback occurs early in the loan when you have paid mostly interest rather than principal. In this scenario, the manufacturer’s buyback covers the purchase price components (net of offset), but if that amount is less than what you owe the lender, there may be a gap.

Your attorney can address this situation by: negotiating a higher overall settlement to cover the gap, pursuing additional claims for the deficiency amount, or structuring the settlement in a way that the manufacturer pays the lender directly and forgives the remainder. Do not assume that being underwater means you cannot have a successful claim — it makes the claim more complex but does not eliminate your rights.

Related Questions

• What Is a Lemon Law Buyback?
• How Is the Mileage Offset Calculated?
• What If I Owe More Than My Car Is Worth?
• Does the Manufacturer Pay My Attorney Fees?