Refund Under Michigan Lemon Law

A refund is the standard remedy in Michigan Lemon Law cases.

What the manufacturer must refund

Under MCL § 257.1403:

1. The full vehicle purchase price including dealer-installed options.
2. All collateral charges — Michigan 6% sales tax, title and registration fees.
3. Incidental damages — towing, rental, lost time.
4. The remaining loan balance paid directly to the lender.

The “reasonable allowance for use”

Typical formula:

(Miles driven before defect manifestation ÷ 100,000) × Purchase price

Typically 10-25% of purchase price. Michigan’s 1-year window means the use deduction is usually smaller than in 24-month states.

Michigan sales tax

Michigan applies a flat 6% state sales tax to vehicle purchases under MCL § 205.51. For Lemon Law refund purposes, the sales tax is reimbursable as a collateral charge. Typical reimbursement on a $42K vehicle: ~$2,520.

A concrete example

Assume you bought a $42,000 vehicle in May 2026:

• $4,500 cash down
• $2,520 sales tax (6%) + $200 title/registration = $2,720 collateral charges
• $33,780 financed at 6.9%, paid for 10 months ($590/month)
• Defect first reported at 4,000 miles in July 2026 (within 1-year window — critical)
• Repair attempts at 4,000 / 7,000 / 9,500 / 12,000 miles
• Current odometer at resolution (April 2027): 15,000 miles

Recovery breakdown:

Element	Amount
Down payment	$4,500
Sales tax	$2,520
Title + registration	$200
Monthly payments × 10	$5,900
Remaining loan payoff	~$30,000
Subtotal	$43,120
Less: reasonable allowance for use (~4,000 mi pre-defect)	–$1,680
Net refund to consumer	$41,440
Plus: Magnuson-Moss § 2310(d)(2) attorney fees	$25,000-$60,000+
Plus: § 257.1407(2) discretionary state fees	If awarded

What the manufacturer cannot deduct

• Wear-and-tear beyond use allowance.
• Market depreciation unrelated to defect.
• “Diminished value” for cosmetic flaws.
• Negative equity rolled into the financing.

The mechanics

1. Settlement, BBB Auto Line decision, or court order documented.
2. Manufacturer wire transfers to lender for loan payoff.
3. Separate wire transfer to consumer for cash component.
4. Consumer signs vehicle title to manufacturer.
5. Dealer takes possession.
6. Loan closes.

Total time: 4-8 weeks for BBB Auto Line; 4-6 weeks for court settlement.

What about attorney fees?

Magnuson-Moss § 2310(d)(2) provides federal attorney fees on prevailing — the primary fee hook in Michigan. § 257.1407(2) provides discretionary state Lemon Law fees.

BBB Auto Line does NOT award attorney fees — only refund/replacement.

When refund makes sense

• The defect is persistent.
• The vehicle has substantial diminished value.
• You want a clean break.

What if the manufacturer won’t comply with a BBB Auto Line decision

The decision is binding on the manufacturer once the consumer accepts. Non-compliance is enforced through court action.

Bottom line

A Michigan Lemon Law refund — combined with Magnuson-Moss mandatory federal attorney fees in court action — produces strong consumer-favorable outcomes. BBB Auto Line produces only the refund component; federal court unlocks the full statutory exposure.

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