App version: 0.1.0

What Does It Mean if a Car Is a Lemon?

What Does It Mean if a Car Is a Lemon?
Austin Kilham
Austin KilhamUpdated November 8, 2022
Share this article:
Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
A “lemon” car is a new or used vehicle with a major problem that surfaces after you buy or lease it. If the dealer can’t fix the car, there are laws in place that enable you to to trade the car in for a new one, or get your money back. Lemon cars sometimes end up back on the market with “lemon titles'' at deeply discounted prices. For a buyer who is knowledgeable about cars and willing to take some risk, a lemon car can sometimes be a good deal.Here’s what you need to know about lemon cars, from how to figure out if you have one to whether or not it’s ever a good idea to buy one.

Lemon Car Meaning

While the legal definition of a lemon car varies from state to state, it generally refers to a vehicle that has a substantial defect that the manufacturer or dealer is unable to fix after a reasonable number of attempts. Typically, the defect needs to be something that makes the car unsafe or difficult to drive, such as faulty brakes, a broken transmission, or a dead engine. It’s important to note that a lemon is different from a recall. A recall is a common occurrence in which a particular defect within the car needs to be fixed at the manufacturer’s expense. The defect is usually announced by the automaker and fixed by the dealership. A lemon, on the other hand, has a problem the dealer is not able to fix in a reasonable amount of time.

Lemon Car Laws

There are lemon laws on the books in every state to help protect consumers.  Though the details vary, lemon laws essentially work like this: If you purchase a new or used vehicle that has a defect or condition that impairs its value and it has not been repaired after several attempts (typically three or four trips to the dealer), you should be compensated for the defect.Remedies vary depending on the type and severity of the problem. The maximum compensation is either the complete repurchase or replacement of the vehicle, whichever is preferred by the customer. When you make a lemon law claim, you’re basically saying your car didn’t live up to its warranty. That means you have to buy a car with a warranty to have a good case. However, it doesn’t have to be a brand new car. Used cars and trucks sold with warranties get lemon-law protection as well.You can find your state's lemon laws by visiting the Better Business Bureau's list of lemon laws by state or going to the website for your state's attorney general or consumer protection office.

Determining If You Have a Lemon Car

If you recently purchased a new or pre-owned vehicle and you’re having a major issue with the car, you might have a lemon on your hands. Here are some of the signs that car might be classified as a lemon:
  • There are recurring problems with vehicle components, such as the brakes, transmission, or engine. 
  • The issues affect the car’s safety and driveability. 
  • The problems are not the result of poor maintenance or an accident, but rather appear to have come with the car. 
  • The problems have not been resolved after a reasonable number of repair attempts. 
You can also do some research to find out whether other drivers have had similar issues with the same make and model of vehicle. If you think you have a lemon car, it’s a good idea to start collecting detailed records, including records of repair attempts and any correspondence you’ve had with the dealer or manufacturer. To start a complaint against the dealership that sold you the car, you’ll need to mail them a certified letter. You can find sample letters online, including this one from Consumer AffairsWhile you can often start a case without a lawyer, should the case become complicated or the dealership fights you on a refund, it can be a good idea to get professional legal advice.

Lemon Title Car Value

If a car is determined to be a lemon, the manufacturer will generally take the car back and either replace it or reimburse the customer for the purchase price. The car will then receive a “lemon” or “lemon buyback” title. If the dealer puts the car back on the market, they are legally obligated to let any potential buyers know that the car has a lemon title. This ensures that any future owner is aware that they are buying a lemon car that may have major issues.A lemon car title is similar to a salvage title, which is given to a vehicle that’s considered a total loss by an insurer. Though a lemon title is not as devastating to a car’s value as a salvage title, lemon title cars are typically offered at steeply discounted prices, which can make them tempting purchases. However, buying a lemon car means you are willing to purchase a car that potentially has big issues. If the car had been repaired, it would no longer have the lemon title, but instead a rebuilt title.

Pros of a Lemon Car

There are certain advantages to buying a lemon title car, the biggest of which is its reduced price. These cars can be relatively cheap compared to buying that same car new or nearly new. Another plus is that, aside from whatever defect it may have, the rest of the car is likely in nearly mint condition. Because these cars are returned within the warranty period, they often have relatively few miles on the odometer and little depreciation. Depending on the car’s defect, you may potentially be able to get it fixed without a lot of added expense. To make sure that’s the case, however, it’s a good idea to review a lemon car's history to find out exactly what the problem was that caused the lemon title, and also get the car thoroughly inspected by your mechanic. 

Cons of a Lemon Car

One of the biggest disadvantages of buying a lemon car is that you don’t know exactly what you’re getting yourself into. In some cases, the reason a car was given a lemon title is because it has a complex problem that is difficult to sort out and repair. This could mean you’ll need to spend a lot of time and money to resolve the issue. The car could also potentially have other problems that have not yet surfaced. Also keep in mind that when you buy a lemon car, you’ll get the lemon title, as well as a limited warranty. You can’t return the car. Lemon laws don’t apply because you bought the car knowing it was a lemon.Another factor to consider is resale. Should you later decide to sell the car, potential buyers may balk at a lemon title, especially if the car is still experiencing issues. The appraisal value of the car may also be low due to the lemon title and the fact that the car is no longer nearly new.Recommended: 3 Ways to Increase the Value of Your Car

Can You Refinance a Lemon Car? 

If you took out a car loan to buy a car that turned out to be a lemon and got a refund, that money can be used to pay off the loan. If the automaker replaces the vehicle, however, you can typically just keep the loan you have. You can also likely refinance that loan at some point down the line. Refinancing essentially involves getting a new loan – ideally with better rates and terms — that you use to pay off your original loan. You then only make payments on the new loan. Refinancing can make sense if rates have gone down, you want to lower your monthly payments, and/or your credit has improved (and you can qualify for better rates and terms).If you purchase a car with a lemon title, however, you may find it tricky to find financing. Lenders tend to be risk averse, which means they may not be willing to offer a loan for a vehicle with an uncertain future value. However, if the lemon car has been repaired and now has a rebuilt title, you may be able to find a small bank, credit union, or online lender willing to finance, or refinance, the car. Recommended: Financing a 10-Year-Old Car: What Are My Options?

Lemon Cars: The Takeaway

If you purchase a car and it turns out to be a lemon, there are consumer laws in place to make sure you’re not stuck with the vehicle. For some intrepid car buyers, lemons present an opportunity to buy a car at a steep discount. If you think that the savings on the purchase price will more than make up for the cost of repairs, it might be a smart move, particularly if you’re handy with cars. Just keep in mind that there is risk involved, and you may find it difficult to find financing for the car unless it has been repaired and now has a rebuilt title.

3 Auto Loan Refi Tips

  1. Refinancing your auto loan could lead to lower monthly car payments and more money in your budget. Lantern by SoFi can help you find the right auto refi loan for you.
  2. Shortening the term of your auto loan may increase your monthly payments, but you’ll likely pay less in interest over the life of the loan.
  3. Generally, the newer your car, the lower the refi interest rate. This is because younger cars typically have a higher value than old or used cars — and the car serves as collateral for the loan. 

Photo credit: iStock/gremlin
The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.LCAU0822002

Frequently Asked Questions

What does It mean when a car is a lemon?
How do you determine if you have a lemon car?
Are there laws against financing lemon cars?

About the Author

Austin Kilham

Austin Kilham

Austin Kilham is a writer and journalist based in Los Angeles. He focuses on personal finance, retirement, business, and health care with an eye toward helping others understand complex topics.
Share this article: