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Volkswagen will provide payments, buyout offers to 480,000 diesel customers

Volkswagen has finally reached an agreement with the US government to address the fraud the company perpetrated against its US diesel customers. While the exact details of the settlement are still being hammered out (today’s agreement is an agreement in principle rather than the final binding contract), Volkswagen has given the broad outline of its plan.

Under the terms of the agreement, VW will offer to buy back 480,000 vehicles 2.0-liter diesel vehicles whose engines emit far more pollution than is allowable under US law. This does not apply to the 80,000 3.0-liter V6 engines in VW, Audi, and Porsche models that also emit far more NOx pollution than the legal limit; these vehicles will be covered in a separate agreement that’s still in the negotiation phase.

VW will reportedly offer to buy back the vehicles at a market price corresponding to their estimated value as of September 2015, before news broke that the vehicles were heavy polluters. Judge Breyer, who oversaw the negotiations, stated that Volkswagen would offer “substantial compensation” on top of the buyback offer, which could explain the simultaneous rumors of a $5,000 payment for Volkswagen owners.

I’m guessing Volkswagen will offer two tiers of compensation. First, it offers to buy back vehicles according to their September 2015 market values — but this isn’t necessarily a great deal if you’re driving a 2009 Jetta or Passat with nearly 100K miles already on the car.

According to Kelly Blue Book, the current trade-in value on a high-mileage (120K) 2009 Jetta TDI in “Good” condition is ~$3,700 in my own zip code. Whether or not that $3,700 actually buys you a decent replacement vehicle, however, may be highly questionable. Tacking on an extra $5,000 would be a way for Volkswagen to compensate former diesel owners for the hassle and difficulty of finding a new car. As part of the deal, customers who previously signed leases for Volkswagen TDIs will be released from those leases without penalty.

There are two other facets to the deal as we currently understand it: First, Volkswagen will have the option to offer to fix the affected vehicles for free, provided the government approves its method for doing so. It’s not clear if the company actually has a solution in mind or not, it simply has the option to offer a repair if one can be agreed upon. Second, the company will create a separate fund to deal with the estimated environmental damage its vehicles have caused over the past seven years.

When the scandal news broke, there was considerable speculation as to whether the government could force owners to report to VW dealerships for repair or not. Given that Volkswagen has yet to announce it had found an acceptable solution, the push seems to be to give everyone a financial incentive to move away from TDIs rather than mandating the shift. Full details of the plan are due on June 21; Volkswagen and the EPA / CARB have another two months to hammer out the specifics before then.

We’re glad to see Volkswagen and the the US government working towards a solution that could fairly compensate current TDI owners, but the problems go deeper than the actions of a sole vehicle manufacturer, however egregious. Better oversight and tighter standards are necessary to halt the steadily growing gap between what vehicles claim on paper and their real-world performance.

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