Refund (Repurchase) Under Arkansas Lemon Law

Under Ark. Code § 4-90-407, when the manufacturer fails to cure within the § 4-90-406 20-day window, it must refund or replace the vehicle — and § 4-90-406(b)(2)(A) gives the consumer an unconditional right to choose the refund rather than accept a replacement. Most Arkansas Lemon Law settlements resolve via refund. Here’s the math.

What the refund includes

Under § 4-90-407(a), a qualifying refund covers:

• Full contract purchase price — the negotiated sale price including dealer add-ons that were part of the sale.
• Collateral charges — sales tax, registration fees, title fees, document preparation fees.
• Finance charges — interest and finance fees paid through the date of refund.
• Insurance premiums attributable to the period of ownership.
• Incidental damages — rental car costs while the vehicle was in the shop, towing, diagnostic charges outside warranty, lost wages for time spent at the dealer.

What the refund excludes

• Damage caused by the consumer — accidents, owner abuse, unauthorized modifications.
• Normal wear and tear — tires, brake pads, scheduled maintenance items.
• Aftermarket modifications — though these may be recoverable separately if the modification was preserved with the original vehicle.

The mileage offset — “reasonable allowance for use”

Under § 4-90-407(a)(1)(B), the manufacturer can deduct a reasonable allowance for use, calculated based on miles driven before the first repair attempt for the nonconformity. This is the single most-negotiated term in AR Lemon Law settlements.

Common offset formulas:

• California-style mileage offset: (price × miles before first repair attempt) ÷ 120,000.
• 120,000-mile denominator is the prevailing AR practice (consistent with most peer states).
• First-attempt miles measured at the date of the first repair order for the nonconformity, not the most recent or the date of the certified-mail notice.

Example calculations (illustrative; actual AR settlements vary):

Purchase price	Miles at first repair attempt	Offset	Refund
$40,000	5,000	$1,667	$38,333
$40,000	12,000	$4,000	$36,000
$40,000	24,000	$8,000	$32,000
$40,000	36,000	$12,000	$28,000

Low first-attempt-mileage cases substantially favor the consumer. The first repair attempt is the critical pivot point for refund math.

Vehicle return and title transfer

On refund, the consumer surrenders the vehicle to the manufacturer (typically via a manufacturer-designated dealer) and signs over the title. The manufacturer:

• Records the § 4-90-414 buyback disclosure on the title and on subsequent resale.
• Disposes of the vehicle via dealer auction, parts recovery, or manufacturer-authorized resale.
• Records the buyback in NHTSA / state DMV databases.

Loan and lease considerations

Most refund cases involve a financed or leased vehicle:

• Financed: the manufacturer pays off the loan balance directly to the lender plus delivers the consumer’s equity refund (net of mileage offset). The consumer’s responsibility is limited to delivering clean title.
• Leased: the manufacturer pays the lessor the residual buyout value plus delivers the consumer’s lease-equity refund (security deposit, cap-cost reduction, payments to date, less mileage offset).

Timing

After settlement is reached:

• Refund payment typically issues within 30-45 days.
• Title transfer happens at vehicle surrender at a designated dealer location.
• Lender payoff typically wires within 7-10 days of settlement signing.

Refund vs. replacement

§ 4-90-407 sets the baseline refund-or-replace obligation, but § 4-90-406(b)(2)(A) gives the consumer an unconditional right to choose the refund — aligning Arkansas with California’s consumer-choice framework rather than the manufacturer-option states. Most AR manufacturers default to refund anyway because:

• Cash settlement caps exposure cleanly.
• Replacement involves dealer inventory matching that may not be available.
• Buyback disposal is more administratively straightforward than the warranty-restart on a replacement.

When the consumer prefers replacement (newer model, identical trim), counsel can negotiate it as a settlement structure — but the consumer is never forced into replacement, since § 4-90-406(b)(2)(A) preserves the refund election.

Bottom line

Arkansas refunds follow the standard formula: full contract price + collateral + incidental damages - reasonable allowance for use based on first-attempt mileage. The mileage offset is the single biggest variable. Low first-attempt-mileage cases recover close to full purchase price; high first-attempt-mileage cases face substantial offsets and may be better served by cash-and-keep or replacement structures.

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