Make Lemonade From Your Lemon
Some cars just don't work. If you buy one that's a dud, arbitration is often the best solution—as long as you do it right
By Jean Chatzky

(MONEY Magazine) – If you drive a lemon off the lot, nowadays you have a good option for solving your beef with the car maker: arbitration. But there's a right way to do it and a wrong way. Scott Taylor learned that lesson the hard way. In late 2001, Taylor, the president of an insurance agency in New York City, snagged a great deal on a Chevrolet TrailBlazer. But before the new-car smell had started to fade, things went wrong.

The day he drove his SUV off the lot, the air-bag light came on—a harbinger of bigger problems with the electrical system. Sometimes the dash lit up; other times not. Sometimes the radio worked; other times nothing. And when Taylor drove 50 to 55 mph uphill, the accelerator vibrated.

With a scant 672 miles on the odometer, Taylor took his SUV in for repair. That was Nov. 30, 2001. The car was in the shop again in January, February, March and April. By August 2002, he had grown so frustrated that he began driving to the dealership every day.

Finally, Taylor turned to New York State's arbitration program. To win his lemon-law claim, he had to prove that he couldn't drive his vehicle for at least 30 days or that the dealer had tried to fix the same problem four times without success. The process dragged on for months, but Taylor persisted. Thirteen months after he had bought his TrailBlazer, GM refunded his money.

In other words, he won. But if the same thing happened again, Taylor says he'd sell the car back to the dealer immediately. "It wasn't worth a year of my life," he says. "Even though I won, I lost."

SIT DOWN, DON'T SUE There is a better way: free, nonbinding arbitration. As I wrote in this column a little over a year ago, binding arbitration can be a loser's game. But where problem cars are concerned, the rules are on your side because you don't give up the right to sue later. For most manufacturers, the Better Business Bureau's arbitration unit (800-955-5100) handles lemon complaints. Ford runs its own unit (800-392-3673), and the National Center for Dispute Settlement (800-777-8119) covers gripes with Chrysler, Mitsubishi and Toyota.

The number of calls to the BBB Auto Line (the largest) has held steady at about 30,000 a year, says BBB attorney Alan Cohen. But the percentage of car owners getting refunds has gone up steadily. Why? Manufacturers have learned that it's in their interest to work with you. A recent study of 3,100 new-vehicle owners by Maritz Research found that consumers whose complaints had been resolved were more likely to buy again from the same manufacturer than were drivers who had never complained at all.

GO STEP BY STEP So what should you do if you suspect that your new car, like Taylor's, is a sourpuss? First, take it back to the dealer and log each visit. If you're not getting anywhere, plead your case with the manufacturer's customer service department. When you're approaching the four-visit or 30-day threshold, call the BBB or one of the other arbitration operations.

You'll get through the process in 40 days, at most. If the result doesn't go your way—or if you don't think the award is generous enough—you can still file a lemon-law claim. Depending on where you live, your next step will be either your state's arbitrator or the courts (look up the procedure in your state at Keep in mind that in the roughly 50% of states where legal fees aren't always reimbursed, you may not be able to find a lawyer to take your case on a contingency basis. And it's probably not worth it to pay for a lawyer yourself. The point is, you may not have to. And, as Taylor learned the hard way, that's a good thing.