Volkswagen has settled a class-action lawsuit by car dealers in America at a cost of $1.2 billion (£964 million).

That’s an average of $1.85 million each for car dealers who say they were hurt by the firm’s diesel emissions scandal.

US District Judge Charles Breyer said the 650 US dealers would be paid over 18 months, ruling the settlement “fair, reasonable, and adequate”.

VW admitted in September 2015 to installing secret software in its diesel cars to cheat exhaust emissions tests, by making the cars appear cleaner than they were.

North American chief executive officer Hinrich Woebcken said earlier it believed the agreement with “dealers is a very important step in our commitment to making things right for all our stakeholders in the United States”. VW has so far agreed to spend up to $22 billion in the US to address claims from owners, environmental regulators, states and dealers stemming from the scandal.

It faces action across the world from government agencies and customers.

Steve Berman of legal firm Hagens Berman said the settlement “represents an outstanding result for… dealers”.