How Does Buying a Lemon Affect Your Car Loan?

Buying a new car may be the best option since, in most cases, brand-new cars are trouble-free. However, not everyone has enough money to buy a new vehicle. In such cases, a used car can be an ideal option. Whether you buy a new or used car, you expect it to serve you without significant issues. However, you may deal with persistent problems that use much of your money. In other cases, a car may have irreversible damage that could risk your life on the road. If you are in a position where repairs don’t seem to end, and the car becomes unreliable, you may return it to your dealer for a refund or replacement, thanks to lemon laws. So, what happens if you take a loan and buy a lemon? Let us look at this in detail.

What Happens To Your Loan When You Buy a Lemon?

Lemon is the word used to describe a vehicle with severe issues that affect its use, value, and safety. So, lemon laws are created to ensure consumers get compensation for cars that don’t meet quality standards after repairs. These laws differ with states, but eventually, you can get payment, a refund, or a replacement if your car qualifies as a lemon. There are state-specific details, remedies, and requirements that must be met for one to be eligible for a lemon law claim.

If you borrowed a loan to buy a car that turned out to be a lemon, there are various factors you must consider when filing a claim. However, you must continue to repay the loan as you go through the process of filing the claim. If you fail to pay the loan, your car may be repossessed, and you will lose your rights under the law. If you cannot continue, contact your lender and tell them you are filing a lemon law claim. Find out if the loan will be affected if you decide to get a replacement for the lemon.

Remedies for a Lemon Car

If you buy a lemon, two main remedies exist to solve the problem.

  • Repurchase

If you choose this option, you will be entitled to a refund, where the dealer will buy back the vehicle. So, a lemon law buyback calculator is crucial to calculate the amount you are eligible for. In a buyback option, you must calculate all the expenses you have incurred with the car, including the down payment, minus the cost for the period the car did not have any issues. The balance will be used to pay the loan directly from the dealership or manufacturer. Sometimes, the refundable money may not be enough to cover the whole loan balance.

  • Replacement

You can also choose to have the vehicle replaced with an identical one and get compensated for the incidental expenses. So, let your lender know you will be getting a replacement. If there were special discounts or deals, the manufacturer or dealer might not be required to offer them for the replaced car.


You should never struggle to fix a car from the beginning or risk your safety with a lemon car. Know your rights and seek a remedy. You can opt for repurchase or replacement to ensure you have a reliable vehicle or get compensation for the expenses you incur.

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