Volkswagen has agreed to pay up to $14.7 billion (£11bn) to settle allegations of cheating emissions tests and deceiving customers.
Nearly 500,000 of the German carmaker’s diesel vehicle customers in the US can choose to sell back their vehicle, install pollution-control retrofits or terminate their lease without penalty.
The car manufacturing giant is to spend around $10 billion (£7.5bn) to compensate them.
Consumers who choose the buyback option will receive between $12,500 (£9,395) and $44,000 (£33k) depending on their car’s model, year and mileage as well as the region of the country where it was purchased, according to the Environmental Protection Agency (EPA).
The settlement comes as regulators last year found some Volkswagen cars were fitted with software that distorted emission tests.
Deputy Attorney General Sally Q. Yates said: “By duping the regulators, Volkswagen turned nearly half a million American drivers into unwitting accomplices in an unprecedented assault on our atmosphere. This partial settlement marks a significant first step towards holding Volkswagen accountable for what was a breach of its legal duties and a breach of the public’s trust.”
In addition, Volkswagen will put $2.7 billion (£2bn) into an environmental fund operated by the EPA and invest $2 billion (£1.5bn) in green vehicle technologies.
Separately, it has also agreed to pay $603 million (£453m) to 44 US states, the District of Columbia and Puerto Rico to resolve existing and potential state consumer protection claims.
Matthias Müller, CEO of Volkswagen AG said: “We take our commitment to make things right very seriously and believe these agreements are a significant step forward. We appreciate the constructive engagement of all the parties and are very grateful to our customers for their continued patience as the settlement approval process moves ahead.
“We know that we still have a great deal of work to do to earn back the trust of the American people. We are focused on resolving the outstanding issues and building a better company that can shape the future of integrated, sustainable mobility for our customers.”