Short answer: yes, if the settlement is a statutory buyback. The manufacturer buys the car back, pays off your loan, and takes the vehicle with a lemon-branded title. A cash-and-keep settlement is the exception. Here is what happens at every step.
A California Song-Beverly buyback is a statutory remedy under Civil Code 1793.2(d)(2)(B) that refunds your money in exchange for the vehicle. The vehicle goes back to the manufacturer. The manufacturer re-titles the vehicle, brands the title under Civil Code 1793.23, and typically disposes of it at manufacturer auction with the branded title.
When a manufacturer repurchases a vehicle for a warranty nonconformity, California law requires the manufacturer to:
This branding is permanent. The vehicle cannot be "unwashed" into a clean title through subsequent sales.
If your loan balance exceeds the buyback total, the manufacturer still covers the full payoff; you do not owe the gap. That is because the "actual price paid or payable" under Civil Code 1793.2(d)(2)(B) encompasses the contract obligation to your lender. For a loan balance of $42,000 on a buyback of $38,000, the manufacturer sends $42,000 to your lender and the transaction closes without out-of-pocket from you.
If your loan balance is less than the buyback total, the manufacturer sends the payoff to the lender and the difference to you. For a loan balance of $18,000 on a buyback of $38,000, you walk away with $20,000 in cash.
You are not losing anything. You are getting a statutory refund plus incidentals and, where applicable, civil penalties. The car goes back because the manufacturer failed to make it right.
When the defect has been partially resolved, when the client needs the vehicle for family or work reasons, or when the manufacturer prefers a negotiated outcome, a cash-and-keep settlement allows the consumer to retain the vehicle and receive a cash payment. Cash-and-keep settlements:
What if I added expensive wheels or a tune?
Removable aftermarket additions can be pulled before surrender by agreement. Irreversible modifications may affect the buyback calculation.
Do I lose my down payment?
No. Down payment is part of the "actual price paid" and is reimbursed.
What about my GAP or service contract refunds?
Unused portions of service contracts, GAP insurance, and extended warranties are recoverable as part of the incidental damages bundle.
Free consultation. No fee unless we win. Manufacturer pays your attorney fees under Civil Code 1794(d).