As its name suggests, mileage compensation is an amount deducted from the total damages when calculating how much a consumer is entitled to under the law. Mileage compensation refers to the process of deducting the number of miles a consumer has driven in a defective vehicle before first experiencing the defect. The number of miles the vehicle had when it was first brought to a dealership for repairs for the defect will be used to determine the mileage compensation amount.

Mileage offset was created to allow manufacturers to deduct the number of miles a consumer was able to "enjoy" before experiencing problems. In this way, a manufacturer only compensates consumers for the remainder of the defective vehicle's useful life, not for the portion during which the vehicle operated flawlessly. For this reason, mileage offset is also called a "usage fee."

The mileage compensation amount is calculated by multiplying the mileage at the first repair visit by the total purchase/lease price of the vehicle and then dividing by 120,000. This allows us to put a price on the mileage. 120,000 represents the average useful life of a motor vehicle. Therefore, this formula calculates the "usage fee" that will be deducted from a consumer's damages in a Product Warranty Act claim.

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