Car Manufacturer Buyback: What It Is and Other FAQs

Purchasing a vehicle is one of the biggest financial decisions a person may make in their lifetime. Not only are you spending thousands of dollars on the unit itself, but you also have to think about the cost of vehicle maintenance for the next few years.

If you’re on a budget, it may be more cost-effective to buy a pre-owned vehicle rather than a brand-new unit. One of the options your dealer may offer is a vehicle that’s being resold after a manufacturer buyback.

What Is a Car Manufacturer Buyback?

A car manufacturer buyback happens when an automobile manufacturer repurchases a car from its owner. There are two types: Lemon Law buybacks and goodwill buybacks.

Lemon Law Buybacks

Lemon Law buybacks occur when the manufacturer is required to repurchase a vehicle considered a lemon under the Tanner Consumer Act provision of the Song-Beverly Consumer Warranty Act.

A car is deemed a lemon if it has significant manufacturer defects or malfunctions to the point where it’s unsafe to drive. Its exact definition varies from state to state.

Each state has its lemon law to protect consumers who buy new or used vehicles with minimal defects. There are three ways lemon laws protect a consumer:

• Cash settlement
• Vehicle replacement
• Buybacks

For a car to be considered a lemon, the defect or malfunction should be discovered within 18 months of delivery or 18,000 miles, whichever comes first. This way, no one can abuse the lemon law and get cash from damage or malfunctions caused by the vehicle owner.

Defects not related to safety require three to four unsuccessful repair attempts before the vehicle can be classified as a lemon. Potentially dangerous issues like brake problems may be tagged after one or two failed attempts. Similarly, a vehicle that’s been at the service center for more than 30 days may also qualify as a lemon.

Because the specifics of lemon laws differ per state, it’s best to consult a lawyer if you suspect that your vehicle qualifies for a claim.

Goodwill Buybacks

Goodwill buybacks occur when manufacturers repurchase a vehicle as a sign of goodwill. A vehicle doesn’t need to have any defects to be repurchased via a goodwill buyback. Manufacturers usually do this as part of their loyalty programs or to resolve customer dissatisfaction even if there’s no evidence that a problem exists.

Manufacturer Buyback Process

To start the process for a buyback, the car owner or lessee should first file a claim by sending a certified letter to the manufacturer stating all the vehicle’s problems and proof of attempts to fix them.

In qualified cases, the manufacturer will repurchase the vehicle instead of engaging in disputes to maintain positive customer relations.

The car is inspected to determine its condition and avoid exploiting loopholes. If they don’t find significant issues or if the problems are misinterpreted, the manufacturer rebrands the title and sells the vehicle as a buyback.

Note that a vehicle with a safety defect that could cause significant injuries won’t be sold to the public until the issue is resolved. This is a rule mandated by the National Traffic and Motor Vehicle Safety Act.

A vehicle with minor issues can be resold by the manufacturer. However, they must disclose the repairs to the buyer.

How to Avoid Buying a Lemon

While manufacturer buybacks help protect consumers, the process may take a while before you can get your money back. As such, it’s better to avoid buying a lemon even if you’re trying to save money on a used vehicle.

Thoroughly research your options before deciding on a specific year, make, and model.

The Federal Trade Commission requires dealers to make a buyer’s guide for every vehicle they sell, including used cars. It has all the necessary information, including the dealer’s contact information.

Check if the unit comes with a warranty, and be more prudent when purchasing models sold as is. It’s also a good idea to get a vehicle history report.

The buyer’s guide should state any significant damage to the car. You must also do a thorough inspection for any defects not included in the report. Check every nook and cranny for damage, and keep an eye out for mismatched parts.

This may be easier said than done, so it’s a good idea to bring a certified mechanic with you.

Are Buyback Vehicles Safe?

Buying a buyback is safe because automakers are required by law to repair any issues that caused the vehicle to be repurchased in the first place. Strict inspection guidelines must be met before the unit can be resold.

There’s also the possibility of a previous owner misdiagnosing their vehicle or exploiting the buyback rule to get out of their car loan.

Should You Purchase a Manufacturer Buyback Vehicle?

There are conflicting opinions when it comes to buying buyback vehicles. Some drivers are fine purchasing units with body or mechanical work done but warn against purchasing buyback vehicles that have undergone electrical repairs.

In other cases, the buyer could overlook minor repairs concerning a paint defect or a rattling door panel in exchange for big savings compared to buying brand new. Buyback cars typically cost 30 to 40% less than the vehicle’s original price.

The decision to buy a repurchased vehicle is entirely up to you. It all boils down to which types of repair you’re okay with and how confident you are that the issue won’t recur.

If you do decide to go through with the purchase, make sure you inspect the vehicle thoroughly. You can even have your mechanic check out the unit for you. It’s also a good idea to take the vehicle for a test drive to ensure all defects have been fixed.