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I pretty much agree that a new car is out of the question. Honda isn't obligated to replace the vehicle. Honestly, until the engine starts to knock constantly they aren't even obligated to replace the engine. They probably should and will in the name of customer satisfaction before then. Lemon laws come into play only when repeated attempts have been tried and failed to fix a problem that significantly impairs the normal operation of a vehicle. A new engine is reasonable, and she should take it to a different dealer to have the engine done. The dealer that she got it from seems less than reputable. I have done dozens of Pre Delivery Inspections, and they take about an hour. During the PDI all fluid levels are supposed to be checked, all operations of the vehicle should be checked, tire pressures set, install the antenna, make sure everything works, and road test the vehicle before the vehicle is sold. I know a lot of PDI guys tend to be entry level guys who don't know what they are doing and when regular mechanics do them they tend to rush through because they think PDIs are gravy and miss things like that.
Sorry to ramble but to make a long story short, they fucked up the PDI, they should give you a new engine, but not a new car.
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