Under the settlement revealed today by a US District Court in San Francisco, VW will pay just over USD 10 billion to either buy back or repair about 475,000 vehicles with cheating 2-liter diesel engines.
The company also will compensate owners with payments of USD 5,100 to USD 10,000, depending on the age of their vehicles.
Although the company has been working on a repair for the vehicles for months, it appears that VW may not be able to fix the cars and will have to buy them all back, according to the documents.
Volkswagen also settled with 44 states, Washington, DC and Puerto Rico, which also sued the company, agreeing to pay about USD 603 million. That brings the total settlements announced today to USD 15.3 billion.
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VW is still facing billions more in fines and penalties as well as possible criminal charges.
Volkswagen has admitted that the 2-liter diesels were programmed to turn on emissions controls during government lab tests and turn them off while on the road.
As part of the settlement, VW must offer to buy back most of the affected cars, or terminate their leases. That's because, according to court documents filed today, there currently is no repair that can bring the cars into compliance with US pollution regulations.
If VW does propose a repair, it must be approved by the Environmental Protection Agency and the California Air Resources Board.
Owners who choose to have VW buy back their cars would get the clean trade-in value from before the scandal became public on September 18, 2015. The average value of a VW diesel has dropped 19 per cent since just before the scandal began.