From time to time someone asks me what happens to all those lemons the manufacturers buy back from my clients. Or, sometimes, “Should I purchase a manufacturer buyback vehicle?” The answer – based on 23 years of work in the field – is a Taylor Swift-esque Never Ever Ever.
For those unfamiliar, all 50 states have Lemon Laws which require manufacturers to buy vehicles back from customers whose cars cannot be fixed after 3 or 4 repair attempts. The defect must be substantial and affect the use or value – and sometimes safety – of the vehicle. What sorts of things have I seen in this field? Vehicles with defective transmissions, faulty electrical systems, engine stalling problems and more. When a case is well-documented I file it up and do what I can to get the vehicle bought back. I have never counted but I have overseen hundreds of buybacks and thousands of cases. Even in the cases where the cars were not bought back they often qualified but that is another story.
When a vehicle gets bought back by the manufacturer, it is taken in and the dealer does what they can to repair the problem. Most are then sent to dealer auctions where the buying dealer is told of the status of the car and usually is also told that the manufacturer will extend a warranty on the car to make up for the vehicle’s history. In some states the title is branded but this is only in a handful of states. Carfax even misses this from time to time.
The status of the car is not always passed along to the consumer who buys the vehicle from that dealer but that is not the question we are addressing here. What if you are told? Might this be a good buy?
I would say No. First of all, you are assuming that the vehicle is fixed. Before the car was bought back, the manufacturer was given a last chance repair. If they had been able to make good on that repair, the lemon law claim would have been defeated. Do you think manufacturers punt on the last chance so they can buy the car back and THEN make the repair? Why would they do that? It will cost them just as much to make the repair either way – but by doing it after they have 1) a ticked off customer and 2) a defective vehicle they have to dispose of. While something like traders insurance can help to protect the dealer from anything that happens after the car leaves the car lot, you still can’t be sure that the car is in working order or at a standard that you might want even after repair.
I have encountered vehicles in my career that were not fixable, short of absurdly expensive repairs (i.e., “anything” can be fixed if you are willing to replace everything). I’ve seen a car that had been in the shop more than thirty (30) times for a hellacious water leak. When the factory rep looked at it he told me it could not be fixed (short of dismantling the car and rebuilding it – at a cost more than the car’s value).
I have seen cars that ate or destroyed parts at an inordinate rate. Timing belts, brakes, oil and so on. The dealer puts in new parts, the vehicle is sold and guess what? The new owner shows up a short while later, looking for a new timing belt or complaining about the brakes or oil consumption.
Yes, the new owner has that warranty which covers this but do you want to spend your time in the shop obtaining your “free” warranty repairs? You don’t mind? And when you have to come back again and again?
But wait, aren’t some vehicles bought back simply because the owner complained about something inconsequential – or because they just didn’t like the car? No. If that was the case, they’d be buying back cars right and left. It’s actually the opposite: They refuse to buy back cars they ought to buy back until they are sued, and even then they put up a fight.
So, that Lemon Law buyback vehicle you are considering purchasing? Don’t. Run away. And if you really think it is a good buy, here is how you appraise its true value. What is the car worth if it is not fixed and cannot be fixed? Pay THAT price for it. But they will never sell it to you at that price. They will tell you to take a flying leap and sell it to someone else down the road – someone who does not know what they are getting themselves into.