Keep Paying vs Stop Paying Your Car Loan During a Claim: Which Is Better?

Published October 19, 2026 · Updated October 19, 2026 · California lemon law

Should I keep paying my car loan while my lemon law claim is open, or can I stop?

Side-by-Side Comparison

Why Your Lender Is Not Part of the Lemon Law Claim

A lemon law claim is between you and the manufacturer. The manufacturer made the warranty and is responsible for fixing the car or, if it cannot, replacing or repurchasing it under Civil Code 1793.2(d)(2).

Your lender is a separate party. It might be a bank, a credit union or the manufacturer's finance company, but its contract with you is about the loan, not the defect. Your duty to pay continues even while the claim is open.

That is why stopping payments rarely helps. The lender does not have to wait for the lemon law claim to finish, and it can report late payments or start collection steps.

Some people feel it is unfair to keep paying for a car that does not work. That feeling is understandable. But the lemon law is designed to make you whole through the claim, including a refund of payments in a buyback, not through skipping payments.

If the loan is with the manufacturer's own finance company, the same advice applies. Keep paying unless the lender agrees in writing to something else.

Your attorney also deals with the manufacturer, not the lender, during the claim. When a buyback is agreed, the attorney and the manufacturer coordinate the payoff with the lender, which is much easier when the account is current.

How Payments Are Treated in a Buyback

In a buyback, restitution is based on the actual price paid or payable, plus collateral charges like sales tax, license and registration fees, plus incidental damages, minus a mileage offset (Civil Code 1793.2(d)(2)(B)).

In practice, that generally means the payments you made, including your down payment, are part of what is refunded, and the manufacturer pays off the remaining loan balance. Your attorney will check how each piece is calculated.

The mileage offset is based on miles driven before you first took the car in for the problem (Civil Code 1793.2(d)(2)(C)). Driving the car and paying for it during the claim does not usually change that number.

This is why keeping up with payments protects you. Each on-time payment becomes part of the paid amount, and a clean payment history makes the loan payoff straightforward when the buyback closes.

Keep proof of every payment. Bank statements, lender account screenshots and receipts all help your attorney confirm the amounts you paid.

If you have a cosigner, keeping up with payments protects them too. Late payments can show up on a cosigner's credit, which can strain family relationships during an already stressful time.

Ask your attorney to show you how the paid amount will be added up. Seeing the numbers helps you understand why each on-time payment matters to the final buyback calculation.

What Happens If You Stop Paying

Missing payments can hurt your credit. Late payments may be reported to credit bureaus, and that history can follow you for years, affecting future car loans, apartments and other credit.

Missed payments can also lead to repossession. If the lender takes the car, you may face fees and a deficiency balance, and the case gets more complicated.

California courts have held that a buyer does not have to still own or possess the vehicle to pursue lemon law remedies (Martinez v. Kia Motors America, 2011). But a repossession still creates problems that are easy to avoid by keeping up with payments.

Stopping payments can also confuse the buyback math. Late fees, interest charges and collection costs may not line up neatly with what the manufacturer agrees to pay, which can slow the closing.

In short, stopping payments puts your credit at risk without helping your claim. It is one of the most common and costly mistakes in lemon law cases.

If you have already missed a payment, call your lender right away and ask how to get current. Then tell your attorney. Acting quickly limits the damage.

Repossession can also cost you the use of a car you still need for work and family. Even a car with a defect is often better than no car while the claim is open.

Example: Keeping Up While the Claim Moved Forward

This is a made-up example. Carmen financed a new compact SUV. After the transmission failed three times in the first year, she was frustrated and thought about stopping her payments until the manufacturer fixed things.

Before she did, she talked to a lemon law attorney. The attorney explained that her payments would generally be part of the refund in a buyback, and that the lender could report late payments or repossess the car if she stopped.

Carmen kept paying and set up automatic payments so she would not miss one by accident. She saved each monthly statement in a folder and shared them with her attorney.

When her claim later resolved, the attorney used those statements to confirm the paid amount and coordinate the loan payoff. This example is made up and does not predict any result, but it shows how steady payments keep things simple.

Carmen also kept her insurance active and kept up with maintenance, which avoided any argument that the car was neglected.

Carmen's experience is a reminder that the claim and the loan run side by side. Taking care of the loan let her focus on the claim without worrying about a call from the lender.

The example also shows a simple habit worth copying: automatic payments and a folder of statements. Both take only a few minutes to set up and remove a lot of worry.

If You Cannot Afford the Payments

Sometimes the problem is not a choice but a hardship. A long repair stay, rental car costs or a job change can make payments hard. If that happens, act early.

Call your lender and ask about hardship options. Some lenders offer a deferment or a modified plan. Get any agreement in writing, with the dates and terms clearly stated.

Tell your attorney right away. Your attorney may be able to factor hardship into the timing of negotiations, and needs to know about any change to your loan.

Keep track of the costs the defect has caused you, such as towing and rental cars. Reasonable incidental damages can be part of restitution, but only if you can show them.

Do not simply stop paying and hope the claim moves faster. A written plan with the lender protects you in a way that silence does not.

You can also ask your attorney whether a loaner or rental car should be requested during long repair stays. Avoiding extra transportation costs can make payments easier to manage.

Ask your lender to note on your account that the car has a warranty dispute. It may not change your payment duty, but it creates a record that you raised the issue.

Leases Work the Same Way

If you leased your car, keep making lease payments too. The lemon law protects people who lease, not just people who buy. In a lease buyback, what you paid is typically refunded and the lease is paid off.

Missed lease payments carry the same risks as missed loan payments: damage to your credit, fees and possible repossession. The leasing company is not part of your lemon law claim.

If your lease is ending soon, talk to your attorney before turning the car in or buying it out. The timing of the lease end can affect how the claim is handled.

Keep your lease agreement and every payment record. Your attorney will need them to calculate what a lease buyback should include.

If a buyback closes, do not stop paying until the leasing company confirms in writing that the lease has been paid off. Then keep that confirmation with your records.

If you have gap insurance, a service contract or other add-ons tied to the lease, keep those records as well. Your attorney can tell you how they fit into the claim.

Common Questions About Payments and Credit

Many people ask whether the manufacturer will reimburse late fees if they stop paying. Do not count on it. Late fees and collection costs are usually the result of a choice the buyer made, and they can be hard to recover. Keeping up with payments avoids the question entirely.

Others ask whether a buyback will fix any credit damage. A buyback pays off the loan, but it does not erase late payments already reported. That history may stay on your report, which is another reason to stay current.

Some ask whether they can trade the car in instead of making more payments. Trading in does not automatically end a California lemon law claim, but it can make the case harder. Talk to your attorney before making that kind of decision.

People also ask what to do if the car is in the shop for a long time. Keep paying even then. Ask the dealer about a loaner or rental, and keep receipts for any rental costs, since reasonable incidental damages can be part of restitution.

Finally, people ask when it is safe to stop. The answer is after the buyback closes and the lender confirms in writing that the loan is paid off. Until then, keep paying.

When Keep paying Is the Better Choice

• Your lemon law claim is still open
• You want to protect your credit
• You want the buyback to go smoothly
• You still have the car

When Stop paying Is the Better Choice

• The buyback has closed and the lender confirms the payoff in writing
• Your lender agrees in writing to a deferment or hardship plan

Key Facts (as of October 2026)

• Keep making loan or lease payments during a claim; missed payments can hurt your credit and lead to repossession.
• Restitution in a buyback is based on the price paid or payable, plus collateral charges, minus a mileage offset (Civil Code 1793.2(d)(2)(B)).
• Keep proof of every payment, such as bank statements or lender receipts.

Talk It Through With a Lemon Law Attorney

Every case is different. Our attorneys, listed in firm order: #1 Jacob Shayesteh (founding attorney), #2 Armig Khodanian and #3 Kamau Edwards, will look at your repair history and tell you which option fits. 5.0 stars on Google from 77 reviews (October 2026). You pay $0, win or lose.

What Our Clients Say on Google

“Jacob was sharp, responsive, and honest about what to expect. He communicated with Audi directly so my parents didn't have to deal with any of it, and the case moved fast.”

Joshua G. · 2024 Audi Q5 hybrid · 5-star Google review

“Jacob Shayesteh picked up the phone himself, which already blew me away. He knew exactly what was going on with my situation, explained the entire California lemon law process in plain English, and handled absolutely everything on my end.”

Brenda E. · 2024 Jeep Wrangler · 5-star Google review

“He helped me obtain all of my repair records and purchase documents through the vehicle's app within the hour and officially started my California Lemon Law case the same day. The entire process was straightforward and stress-free, and I never had to deal directly with the manufacturer.”

Miki B. · Lemon law client · 5-star Google review

Read all 78 reviews on Google (5.0 stars, October 2026). Reviews describe past clients' experiences; every case is different.

FAQ

Will I get my payments back?

In a buyback, the payments you made are generally part of the refund, minus a mileage offset, and the loan is paid off.

What if I cannot afford the payments?

Call your lender and ask about a written hardship plan, and tell your attorney right away.

Does the same rule apply to a lease?

Yes. Keep making lease payments. A lease buyback typically refunds what you paid and pays off the lease.

Sources and Official References

• California Civil Code section 1793.2 (California Legislature)
• California Civil Code section 1794 (California Legislature)
• California Attorney General, consumer protection
• California Department of Consumer Affairs: California's Lemon Law Q&A
• California Department of Consumer Affairs: New Lemon Law Procedures (AB 1755)
• California Attorney General: Buying and Maintaining a Car

Laws change. This page reflects California law as of October 2026 and was reviewed by Jacob Shayesteh, Esq.

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Attorney advertising. Wynn Law Group, APC, 10850 Wilshire Blvd, Suite 1010, Los Angeles, CA 90024. General information, not legal advice. Results vary. Prior results do not guarantee a similar outcome.