Discovering that your new vehicle is a lemon can be frustrating and overwhelming, but California Lemon Law offers powerful remedies to help make things right. One of the most common outcomes is a vehicle buyback, where the manufacturer repurchases your defective car.
However, for many consumers in Los Angeles, the next question is just as important: What happens to my car loan, my credit score, and the GAP insurance I purchased?
At Shainfeld Law, our lemon law attorneys guide California clients through the legal process and the financial aftermath. Here’s what you need to know about how a Lemon Law buyback can affect your loan, credit, and other related obligations.
What Happens to Your Auto Loan After a Lemon Law Buyback?
If the manufacturer repurchases your vehicle, they are required to pay off the remaining loan balance as part of the settlement. This amount is typically calculated as the outstanding principal balance at the buyback, not including interest or late fees.
It’s important to note:
- If you financed the car, the manufacturer pays your lender directly.
- If your loan is “underwater” (you owe more than the car is worth), you may still be responsible for the negative equity, but this depends on the terms negotiated in your Lemon Law settlement.
At Shainfeld Law, we work to ensure that your buyback package fully addresses any remaining loan balance to avoid lingering financial burdens.
Will a Lemon Law Buyback Affect My Credit Score?
A Lemon Law buyback usually does not negatively impact your credit. The vehicle is not being voluntarily surrendered, repossessed, or written off for non-payment—it’s being returned under a state law designed to protect consumers.
To be safe:
- Request written confirmation from your lender that the loan has been paid in full.
- Monitor your credit report to ensure it reflects a zero balance and does not list the buyback as an adverse event.
If your lender or credit agency misreports the buyback, Shainfeld Law can help you correct the record.
What About GAP Insurance—Do I Get That Money Back?
GAP (Guaranteed Asset Protection) insurance covers the difference between what your vehicle is worth and what you owe if the car is totaled or stolen. While not directly applicable in Lemon Law cases, many consumers purchase GAP when financing a new vehicle.
If your loan is fully paid off in a Lemon Law buyback:
- You are typically no longer responsible for any remaining “gap” between value and debt.
- You may be eligible for a prorated refund of your GAP policy premium, mainly if financed into your loan.
Contact your GAP insurance provider with proof of buyback and payoff to pursue a refund. If the manufacturer paid off your vehicle, your GAP policy is no longer effective.
Managing the Financial Aftermath with Confidence
Navigating the financial details of a Lemon Law buyback can feel complicated, but it doesn’t have to be. At Shainfeld Law, we advocate for full and fair compensation that protects your financial health, not just your transportation needs.
If you’re returning a lemon and have questions about your loan, credit, or GAP insurance, contact our experienced Los Angeles lemon law attorney today by calling 888-609-2593 or requesting a free consultation online. We’ll walk you through every step and make sure your finances are safeguarded.