Volkswagen to start emission scandal buybacks

Alternatively, owners who want to keep their cars can wait to find out if VW develops a modification for their specific vehicles that is approved both by the EPA and the California Air Resources Board.

US District Court Judge Charles Breyer said the agreement had been reached between consumers, the government and the automaker. He called the deal "fair, reasonable and adequate".

Volkswagen has submitted a proposed software fix for 2015-model year 2-litre diesels, or around 15 percent of the 2-liters on United States roads.

The vehicles were equipped with a "defeat device" that allowed them to cheat US emissions tests in the shop, and then operate at an illegal level when on the road.

The accord requires VW to buy back cars with 2.0-litre diesel engines armed with so-called defeat devices used to beat emissions tests.

Customer participation in the settlement will be important for Volkswagen's bottom line, as the settlement requires Volkswagen to either buy back or fix 85 percent of the affected diesel cars by June 30, 2019.

The settlement calls for the German vehicle giant to spend up to 10 billion dollars (£8.1 billion) to buy back or fix the affected cars. All participants will also receive cash payments. Owners can choose between getting the software fix or selling their vehicle back to VW. Owners will get the pre-scandal "trade in" value of the vehicle and Dollars 5,100 to USD 10,000 in additional compensation. Some Audi A3s also are covered.

Another 90,000 cars with 3-litre diesel engines also have cheating software, but they aren't part of this settlement. Volkswagen, regulators and consumers' lawyers still are negotiating a possible settlement for those vehicles.

VW's now-agreed proposal allocated $10.033 billion to compensate owners of 2.0-liter VW diesels for their rule-breaking cars. The final figure depends on how many auto owners take advantage of the offer.

Volkswagen will also pay $2.7 billion for environmental mitigation and another $2 billion for clean-emissions infrastructure.

It's the largest civil settlement in automaker history, and the largest false advertising case the Federal Trade Commission has ever seen. The agreements were developed in parallel.

Volkswagen is also being sued by Australia's consumer protection group for misleading consumers in the country over emissions testing.

She said in June that before customers choose to have their vehicles fixed instead of opting for the buyback, they will be notified with full disclosure of any potential effects on fuel efficiency and vehicle performance.

The buyback deal at the same time also resolved some claims brought by United States and California environmental regulators who had sought penalties for Volkswagen's violations of pollution laws. Tom Backer, general manager of a VW dealer in White Plains, New York, says he'll try to sell returning owners on a turbocharged, gas-powered VW Jetta that gets 38 to 40 miles per gallon on the highway.

Missouri has recently filed a lawsuit against Volkswagen.

The compensation scheme that has been reached is still not a final conclusion, however, it still needs to be officially approved by a USA judge before compensation and the buy-back scheme can commence.

Information for this article was contributed by Kartikay Mehrotra and Margaret Cronin Fisk of Bloomberg News.

  • Zachary Reyes