"Volkswagen agreed to pay out $10.2 billion to settle a lawsuit
brought by the federal government for cheating on emissions tests. The
settlement will compensate owners of 482,000 vehicles with two-liter
diesel engines that were programmed to turn off emissions measurement
data outside of laboratory settings. The automaker will pay owners
between $1,000 and $7,000 per vehicle and promised to fix the cars
free of charge. (Jacob Bogage)"

How are they spending so much, or why are owners getting so little, if
there is 10 billion to be paid out and half a million cars?

From those numbers, I get 20 billion to 1 million meaning 20,000
average payment. Do they expect 70 or 85% administrative costs? Or
are they only going to pay out 2 or 3 billion and then say they are
done? Or are they going to pay many of themselves 100's of millions
each in bonuses because they suffer stress when they are sued?