The Lemon Law: Your Rights as a New Car Buyer or Lessee
The 1987 General Assembly enacted a "lemon law" to give better
remedies to North Carolina consumers who buy or lease a new car that
is a "lemon." The lemon law (a) defines clearly what cars are
lemons, (b) spells out exactly the relief to which the purchaser of,
and consumer leasing a lemon is entitled and (c) provides that a
manufacturer who unreasonably refuses to grant to the buyer of or
consumer leasing a lemon the relief to which he is entitled must pay
the consumer triple damages and attorney's fees.
What Vehicles are Covered?
The lemon law does not apply just to passenger cars. It covers
any new motor vehicle other than a house trailer, provided that the
vehicle does not have a gross vehicle weight of 10,000 pounds or
more. Thus, the law covers pickup trucks, motorcycles and most vans,
as well as cars. And the purpose for which the vehicle is purchased
or leased is not relevant. But, any cars purchased or leased prior
to October 1, 1987 is not covered by the lemon law.
When is a Car a Lemon?
A vehicle is a lemon if it is "seriously defective" and could not
be repaired in a "reasonable number of attempts."
A serious defect is "any defect or condition or series of defects
or conditions which substantially impair the value of the motor
vehicle to the consumer." The defect must be in a part of the car
covered by the manufacturer's express warranty, but it is not
limited to things which make the car driveable. Leaks, lack of air
conditioning or heat or serious paint problems, to name a few, could
be defects which substantially impair the value of the vehicle to
Also, in order for the vehicle to be seriously defective, the
defect must have appeared within the express warranty period. The
lemon law requires all vehicles to have an express warranty of at
least twelve months or twelve thousand miles. If the express
warranty period exceeds 24 months or 24,000 miles, the consumer's
right to a replacement or refund is limited to defects which first
occur within that first 24 months or 24,000. For warranty defects
which occur after within the warranty period, but after the lemon
law's 24 month/24,000 mile limitation, the consumer would have to
seek compensation for failure to repair if the vehicle is not
repaired after a reasonable number of attempts. Compensation for
failure to repair is the difference in the value of the car as it is
and the value it would have if repaired, or the cost of repairs.
Note that the express warranty on a new motor vehicle stated in a
number of miles begins from the date the vehicle is delivered to the
consumer. For example, if a demonstration model with a 24,000 mile
warranty has 4,000 miles on it when the consumer buys it, the
warranty will remain in effect until the vehicle has 28,000 miles on
"Reasonable Number of Attempts"
The law presumes that "a reasonable number of attempts have been
undertaken" to fix the defects if:
1. The same defect has been presented to the manufacturer, or its
authorized dealer for repair four or more times without success, or
2. The vehicle has been out of service during or while awaiting
repair of a defect or series of defects for a cumulative total of 20
or more business days during any 12 month period of the warranty,
provided that the consumer has notified the manufacturer directly in
writing of the existence of the defects or series of defects and
allowed the manufacturer a reasonable period, but not more than 15
calendar days, to fix them. This last requirement makes it vital
that customers write the manufacturer directly about the problems
early on if the dealer is having trouble getting them fixed. Do not
let the dealer talk you out of writing the manufacturer directly.
You must do this to get your rights under the law.
What Remedies Are Available to the Consumer?
If the manufacturer has not fixed the vehicle after a reasonable
number of attempts, the purchaser or leasing consumer is entitled to
choose a comparable, new replacement vehicle or a refund. The
statute is not specific as to what is a comparable new replacement
vehicle, though it would clearly include an identical make and
model. However, the consumer may choose a refund instead of a
replacement. The statute is very specific about how to determine the
amount of the refund. A purchaser is entitled to a refund of:
1. The full contract price including, but not limited to, charges
for undercoating, dealer-preparation and installed options, plus the
non-refundable portions of extended warranties and service
2. All supplemental or collateral charges, including but not
limited to, sales tax, license and registration fees, and similar
3. All finance charges incurred by the consumer after he first
reports the defect to the manufacturer, its agent, or its authorized
4. Any incidental damages and monetary consequential damages,
less a reasonable allowance for the consumer's use of the vehicle.
Incidental damages include, among other things, reasonable
expenses for inspecting and transporting the vehicle (e.g., towing
expenses), costs to cover alternate transportation (e.g., rental car
fees), and hotel expenses, if any. Monetary consequential damages
include the value of lost use generally.
A leasing consumer is entitled to a refund of:
1. All sums previously paid by the leasing consumer under the
terms of the lease;
2. All sums previously paid by the leasing consumer in connection
with entering into the lease agreement, including, but not limited
to, any capitalized cost reduction, sales tax, license and
registration fees, and similar government charges; and
3. Any incidental and monetary consequential damages.
Because it is the manufacturer that is responsible for the
vehicle, the leasing must recover from the manufacturer, not the
lessor. The lessor also may recover from the manufacturer. Remedies
available to the lessor are described at G.S. § 20-351.3(b)(2).
The statute defines a "reasonable allowance for use" as that
amount directly attributable to use by the consumer prior to his
first report of the defect to the manufacturer, its agent, or its
authorized dealer, and during any subsequent period when the vehicle
is not out of service because of repair. "Reasonable allowance is
presumed to be the cash price of the vehicle multiplied by a
fraction having as its denominator 100,000 miles and its numerator
the number of miles on the vehicle attributed to the consumer." For
example, if the cash price of the vehicle was $20,000 and the
purchaser or leasing consumer had driven the car 10,000 miles before
getting a refund, the owner would be entitled to the full refund,
less $20,000 (10,000/100,000), or $2,000.
What Steps Should I Take?
1. When you buy your car, read your warranty and owner's manual
carefully. Follow all maintenance guidelines.
2. When you notice a defect, take the vehicle to an authorized
dealer for repairs as soon as possible. Prepare and leave a detailed
list describing each defect each time you take the vehicle in for
repair. Keep a copy for yourself.
3. Get repair orders for all warranty work. Ask for detailed
repair orders and keep them.
4. Be sure the repair orders show how many days the vehicle was
in the shop.
5. Keep a personal record of the number of days the vehicle is in
the shop, dates, and mileage.
6. Keep a record of all related expenses, such as towing charges
and rental car fees, and save all receipts.
7. After the third repair for the same defect or if the vehicle
has been out of service for 15 business days, notify the
manufacturer and the finance company in writing (if you have not
done so already) and send the notification by certified mail, return
receipt requested. Ask the manufacturer to have the car fixed. Send
a copy to the dealer. You will probably find the address of the
manufacturer in your warranty or owner's manual or you can get it
from the dealer.
8. Keep copies of all correspondence.
9. Do not return the car or stop making payments. Talk to an
attorney if you are at this point.
What About Arbitration?
Many auto manufacturers have established dispute resolution
programs for customers with warranty problems. Some require you to
use these programs before you go to court. Some do not. Read your
warranty to see if the manufacturer has established a "dispute
resolution" program and if you must use it before going to court.
Ford and Chrysler operate their own programs. As of October 1, 1992,
the following manufacturers participate in an arbitration program
run by the Better Business Bureau: Acura, Audi, General Motors (all
divisions), Honda, Infiniti, Isuzu, Nissan, Saab/Scania, Saturn,
Sterling, and Volkswagen. If your warranty requires you to use the
dispute resolution program, follow the instructions in the warranty
to start the procedure. If your warranty does not require dispute
resolution, decide if you want to try it.
Seeing a Lawyer
If arbitration fails, or if you did not have to use arbitration
and did not want to, you should consider seeing a private attorney.
Many people are reluctant to do this, but we encourage it. Some
manufacturers, unfortunately, do not take consumer complaints too
seriously until they hear from an attorney. Your attorney can advise
you best what to do with the car and whether to stop making
The lemon law provides that you can recover triple damages and
attorney's fees if the manufacturer is found to have unreasonably
refused to resolve your complaint.
You are, of course, welcome to contact the Consumer Protection
Section of the Attorney General's Office. The Attorney General's
Office can provide you or your attorney with useful information, or
we can try to mediate your complaint. However, it cannot act as
private counsel to particular individuals. The Attorney General is
interested in receiving information from individuals regarding how
manufacturers handle these matters because the Attorney General can
sue to enforce the lemon law when the public interest requires it.
North Carolina Department of Justice
Consumer Protection Section
P.O. Box 629
Raleigh, NC 27602-0629
Telephone: (919) 716-6000
Fax: (919) 716-6050