A consumer may realize that their newly purchased or leased vehicle is defective soon after they acquire it or possibly after they have had the vehicle in their possession for a length of time, added aftermarket car parts and driven a significant number of miles. While the lemon law was drafted to protect consumers from manufacturers of defective vehicles, it was not drafted to act as a punishment for those manufacturers by holding them responsible for mileage attributable to the consumer or for car parts that they did not warranty. To make the legal system and the lemon law fair to manufacturers, but to still provide justice and recourse for the consumer, the California Lemon Law included a provision to offset the relief a consumer is entitled to by the amount or value attributable to the consumer’s use of the vehicle.
When drafting the lemon law, the California Legislature understood that determining this precise amount or value could be challenging, so it provided a specific, mathematical formula to determine the value attributable to consumer use. This formula, known as the reasonable allowance formula, is used whether the consumer elects to receive a monetary refund or be compensated with a replacement vehicle following a successfully litigated lemon law claim. The reasonable allowance formula considers the number of miles driven by the consumer before they brought the vehicle to the manufacturer, or its agent, for repairs and the original price paid by the consumer at the time the vehicle was leased or purchased. The reasonable allowance formula divides the mileage attributable to the consumer by 120,000. The resulting number is then multiplied by the amount that the consumer paid when the vehicle was purchased or leased to determine the allowable use deduction.
An important consideration for consumers to anticipate is that the manufacturer will also not be responsible for compensating a consumer for any aftermarket car parts that were added to the vehicle after it was purchased or leased. Aftermarket car parts include items such as upgraded stereo systems, larger wheels and custom interior. The reason for this consideration is that, under the California Lemon Law, the manufacturer is responsible for honoring the express written warranty provided to the consumer at the time of purchase. By filing a lemon law claim, the consumer is requesting that the court enforce that express written warranty. Because aftermarket car parts are added after the vehicle was manufactured, and the express written warranty covers only the original vehicle, those car parts would not be included under the written warranty and a court cannot force a manufacturer to compensate the consumer for them.
The reasonable allowance formula was intended to provide both consumers and manufacturers with a precise value that the manufacturer can deduct from the amount owned to the consumer. However, because issues may arise regarding the purchase price, the mileage on the vehicle at the time the vehicle was brought in for repairs or the car parts covered under the written warranty, it is important for consumers to consult with an experienced lemon law attorney to make sure they are being adequately compensated by the manufacturer.