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How to Make the Most of Your VW Settlement

Oct. 18, 2016
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Loyal owners of Volkswagen diesel cars understandably felt betrayed when they learned VW had rigged the testing process to bypass U.S. emissions standards. But some owners had a change of heart after learning how much VW would pay them to turn in their cars when the proposed deal was announced in June.

For example, San Diego resident Mark Holthoff, a manager for a community site for used-car enthusiasts called Klipnik.com, saw the value of his 2014 Volkswagen Golf TDI plummet 30% after the “dieselgate” scandal broke in September 2015. But Holthoff’s emotions changed when he read the terms of the proposed $14.7 billion settlement and learned that VW would pay him $26,000 for his hatchback. It nearly matched his purchase price of $27,000 — which meant that “basically, we got a car for free for the last three years.”

Not everyone is happy with the settlement, though, and U.S. District Judge Charles Breyer — who gave preliminary approval to the deal in June — heard objections from some owners in an Oct. 18 hearing in San Francisco. He said he will rule in writing by Oct. 25 and is “strongly inclined” to accept the settlement, according to Reuters.

The Environmental Protection Agency and other federal and state agencies sued VW, which has acknowledged fitting nearly 475,000 VW and Audi 2-liter diesel vehicles from the 2009-15 model years with defeat-device software to pass smog tests. Thanks to the settlement, people who thought they were buying or leasing the sporty, “clean diesel” vehicles are sorting through a complicated set of tables and charts to find out what they will be paid — or waiting to see if a fix will be available to bring their cars into compliance with air quality standards.

VW is offering “a complicated package, but it’s hugely comprehensive and allows for a lot of choice,” says Karl Brauer, a senior analyst at Kelley Blue Book, an automotive pricing guide and information site. “There are many different routes, and people can figure out which is best for them.”

Sorting through options

With the expected approval of the settlement, payouts could begin in November. As of September, more than 311,000 people have registered for the settlement and about 3,300 people have opted out, keeping their legal options open, according to an Associated Press report.

Current owners face these two options:

  • Sell the car back to VW for its National Automobile Dealers Association (NADA) value — the trade-in price for the car in clean condition, adjusted for options and mileage —  at the time the cheating was revealed on Sept. 18, 2015. The Federal Trade Commission estimates buybacks could range between $12,500 and $44,000.
  • Alternatively, owners can opt to keep the diesel car and have it  brought up to standards for free by a fix that VW is developing. However, it’s unknown what the fix will require, and how the car will perform after the addition of the emissions hardware.

In either case, current owners (and some past owners) will receive a restitution payment of $5,100 to $9,800 depending on the car’s model and year. People leasing the affected diesel vehicles could terminate their leases without penalty and receive a restitution payment.

Some owners are disappointed, however, because the buyout amount will not pay off their entire loan amount.

“I loved my car, and if this hadn’t happened I would just keep driving it,” says Ron Montoya, Edmunds.com’s senior consumer advice editor, who owns a 2010 VW Golf TDI. “But I can’t pass up that much money.”

Alan Matisoff, of Huntington Beach, California, originally paid $33,000 for his 2013 Volkswagen Beetle TDI convertible. VW is offering him a settlement of $26,356, but he finds the $7,000 loss unacceptable, especially since — at the age of 70 — he didn’t expect to have to buy another car.

Matisoff, who was disappointed to find that he was driving a car that exceeded pollution limits, feels slighted by the settlement. “I feel like I have been cheated twice,” he says.

How to maximize the settlement

The first step for current owners of the affected VW vehicles is to find out if they’re eligible for the buyout and restitution, and what the terms will be, says Kelley Blue Book’s Brauer. Eligible owners should be notified by mail, but they can check options by going to the VW settlement website.

To begin the buyback process, register via VW’s claims portal, which automatically adjusts for options and mileage and then totals the buyback offer. On the same webpage, a box can be checked if a buyback is desired. Checking that box, however, is not binding — the decision can be reversed later. And remember that none of the terms will be put into motion until the settlement is approved.

Collect your car’s documents and set aside about a half-hour to work through the application process, Montoya says. Once you know the buyback figure, consider which car you can buy with the amount. Run the numbers through an auto loan calculator and try different financial arrangements, perhaps using part of the buyout for a down payment and saving the rest to make payments.

Keep in mind that the settlement locks in the buyback price for about two years (the deadline to submit a claim is Sept. 1, 2018). Some VW forum commenters have suggested keeping the car until just before the cash-back deadline but driving fewer miles (so that they minimize the mileage deduction on their buyback price). By doing so, they would be driving a car without paying for depreciation — something that is typically impossible for car owners.

Montoya predicts that VW will offer some generous “loyalty” cash-back incentives to win back customers. He’s planning to buy another VW Golf — but this time with a gasoline engine.

Philip Reed is a staff writer at NerdWallet, a personal finance website. Email: preed@nerdwallet.com.

This article was written by NerdWallet and was originally published by The Associated Press.