Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: Dec 26, 2011

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A lemon car is a vehicle that a consumer finds to be defective after purchasing it. In the event a buyer finds they purchased a lemon car, there are state-specific “lemon laws” that may require a car manufacturer to buyback the vehicle for the full cost of the consumer’s auto loan.


Spotting a Lemon


The Center for Auto Safety spells out lemon laws by state so consumers can quickly access the rights they’re entitled to when it comes to lemon cars. Depending on location, defects such as manufacturing errors, mechanical flaws, improper installations, shoddy collision repair, and cars created using pieces from various other automobiles in a Frankenstein-esque fashion can all qualify as lemon cars.


But when it comes to lemon cars, unfortunately they’re not as easy to spot as their yellow, bumpy namesakes. Rather, some investigative research is required.


Before taking an auto loan out, it’s important to know a vehicles history. Websites that offer car-history reports, such as or are excellent tools for looking at an automobile’s past. These reports usually cost a small fee, but the results can save you excruciating headaches and thousands of dollars down the road.


The National Highway Traffic Safety Administration is a resource that allows consumers to check for automobile recalls. This is another internet-stop that car buyers need to be aware of, as many car recalls aren’t openly advertised. Rather, they’re only presented if the recalled part presents a problem. In some cases, those problems equate to collateral costs or worse. Borrowers can avoid this by checking any recalls before purchasing a vehicle.


After internet research has been thoroughly done, use a local expert’s analysis. When test driving a vehicle—new or used—take it to a mechanic and have him run a complete diagnosis of the car. A car dealer or private seller should have no problem allowing a mechanic to check the vehicle out—and if they do, don’t buy it.


Taking a Lemon Back


Often times, dealers are willing to negotiate a deal with a consumer without the need of getting the courts involved. Mediation is the preferred method, and this type of dispute resolution often comes up with a favorable outcome for auto loan holders, as they understand the product purchased did not turn out to be the product promised.


In the event a buyer has to take a manufacturer to court, most states require the manufacturer to pay for attorney’s fees in the event it’s ruled the car is a lemon.


Sometimes, instead of granting full payment for the auto loan, manufacturers and dealerships may offer a replacement vehicle as compensation.


Resources such as the National Association of Consumer Advocates and the National Automotive Dealers Association can be of service to any buyer who purchased a lemon.