Volkswagen has agreed to pay at least $1.26bn to settle claims related to 75,000 3.0-litre engine diesel cars equipped with illegal emissions-test cheating software in the US.

The German carmaker and US regulators have agreed on a settlement that gives owners of these cars “substantial cash compensation” in addition to having their cars repurchased or fixed to be compliant with US emission standards.

The agreement, expected to receive preliminary approval from a US court on February 14, comes in two parts.

Damages in the US for the emissions scandal alone are now about $22.5bn, including the criminal and civil settlement reached last month, a 2.0-litre settlement reached in June and a dealership settlement finalised last month.

Volkswagen will buy back or fix about about 20,000 VW Tourag and Audi Q7 cars from model years 2009 to 2012. The buy back price is fixed as of September 2015 — when the cheating scandal was revealed by the Environmental Protection Agency. In addition, consumers will receive compensation ranging between $7,755 to $13,880.

The remainder of the cars are newer, “Generation 2” models — made by VW, Audi and Porsche —that can be made compliant, according to US regulators. These cars will not be offered a buyback, but they will be repaired and consumers will given between $7,039 and $16,114.

A fix for these Gen2 cars has not yet been approved, however, and if US regulators fail to green light a repair then VW will be forced to buy them back, increasing the agreed settlement cost from $1.26bn to more than $4bn.

Volkswagen acknowledged in September 2015 that more than 500,000 cars in the US had “defeat devices” installed in them, allowing its cars to bypass emissions tests while spewing excess pollution in normal use.

The majority were 2.0-litre cars that cannot be modified in a timely manner, so VW agreed to a $15.3bn settlement last June to buy back the cars or to recall them once an appropriate fix has been found.

The 3.0-litre engine cars were dealt with separately, as VW long maintained that these newer, more expensive cars could be repaired.

Elizabeth Cabraser, lead counsel for plaintiffs, said the settlement puts consumers one step closer to the goal of “providing consumers fair value for their vehicles, while repairing or removing illegally polluting vehicles from the road.”

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