Weston Hurd logo

You Auto Know!® - Lease Terminations

Scenario: A customer comes to the dealership at the termination of his lease and wants to purchase the vehicle. Since it is a very desirable vehicle, the sales person and manager increase the purchase price by $5,000 and since it was eligible for a CPO program, they tacked that on to the purchase price and charged registration fees. Shortly thereafter the dealership receives a demand letter from an attorney. What are the dealership’s responsibilities? 

This is going to be a very short You Auto Know®. The facts in the scenario are happening quite frequently since the market is short on new and used vehicles. The terms of the buyout are controlled by the lease agreement. The agreement has very specific terms regarding the buyout purchase price and the items that can be sold at the time of the purchase. In many lease agreements, the dealership cannot tack on any costs to the buyout price. This can include doc and registration fees. Further, it is a breach of the dealer financial institution agreement and the dealership can be punished by the financial source for violating the terms of the lease provisions. 

In the scenario, the dealership has absolutely no defense and will be responsible for, at a minimum, reimbursing the customer for any items over and above the buyout price prohibited by the lease plus attorneys’ fees. In many situations, the amount can be tripled. 

It is recommended that the dealership’s managers become familiar with the buyout provisions of the various financial institutions utilized to lease vehicles. Obviously, if it is a captive, your finance manager, sales manager and general manager should already know the terms of the buyout clause.

Contact Information

Robert A. Poklar, Esq.

rpoklar@westonhurd.com – 216.687.3243