Dealerships nationwide charge auto consumers excessive, undisclosed buyout fees at the time of payoff. The auto financing company sends a statement to customers who, in nearly half of the states, require leases to close in person at an auto dealer instead of paying off a lease directly to a financial company.
The Consumer Leasing Act requires disclosure of any fees during a lease agreement. “If they are not disclosed in the lease, you cannot charge them,” Darren Newhart, Pike & Lusting Florida attorney said.
When a person chooses to purchase their leased vehicle, the dealership fees for buying out a lease range from a few hundred dollars to exceeding thousands. Jorge Curo leased a minivan from Priority Nissan in Chantilly, VA, to commute his growing family.
Like many, he didn’t have the funds for a new vehicle and financed it. Curo entered a loan with regular monthly payments using a financial department that works alongside his trusted car dealership.
“Leasing was my only option; I had just started a family and was mortified when I saw my dealer’s processing fees. My statement said one amount, and when I went to pay it off, they assumed I had $4000 extra dollars to spend on nonsense charges; it wasn’t fair,” Curo said. Curo became the victim of a nationwide practice of adding undisclosed fees to a payoff statement.
When an auto customer can pay off their car lease, they receive a letter from an auto manufacturer like Nissan, Ford, or Buick’s financial department. The letter reads something like: “We received your request for information about the payoff amount on your lease, account number… the payoff is $19,143,” according to a Nissan-Infiniti financial statement.
A dollar amount will follow, indicating the total amount a customer needs to pay off their debt and own their vehicle outright. On paper, a client receives a fixed rate, like in Curo’s case, “$19,838.13.” Customers can pay the auto manufacturer directly or with assistance from their preferred dealership.
Curo’s dealership, Priority Nissan, charged “taxable” fees ($2,495), “processing fees” ($899), “tax” and “nontax” fees amounting to $3,695 over Nissan’s official payoff statement.
“I am sure it’s a national issue. Anywhere there is money to be made, it’s not going to be isolated,” Newhart said.
Reports from local news sources like Florida’s Local News 10, WCVB Boston, ABC 7 New York, and online social forums like Yelp, Reddit, Facebook, and Twitter had comments from upset, frustrated, and confused leasing customers.
“One dealership in New Jersey hit me with a certification fee of $3,895 ALONE. Without the sales tax!” Reddit user “foreverpondering,” commented.
“Guy was rude and arguing saying he cannot sell me a car unless I pay some $3,000 fee to have the car ‘Kia certified,’” Briana R., a Yelp reviewer, wrote on her experience with Cherry Hill Kia in New Jersey.
Local News 10 in Florida found Midway Ford charged customer Joel Messa over $2,200 in fees to buy out the lease on his 2018 Mustang, a $1,731 pre-delivery service charge and a $495 electronic registration filing fee, neither of which were in his original lease.
Kim Hodson told WCVB Boston she wasn’t exactly sure what she had paid for when she left Kelly Nissan. Another Kelly Nissan customer, Tom Waisnor, said he was charged $2,398 for a state inspection and a “Nissan Certification.” He refused to continue the auto-lease buyout process and left the dealership.
“If I subtract the $1100 from the dealership’s ‘walk-away’ price, I’m still paying an extra $1600 over what it says in my lease agreement,” New Mexico Reddit user “Kind-Statistician983,” wrote.
“I live in California, and my Honda dealer charged me unnecessary add-on service contracts and forced me to pay $500 more than my residual, as a ‘market adjustment,’ in addition to sales tax, license and registration fees, and $100 document processing fee,” Californian Reddit user, “bananaboat95,” wrote.
A Reddit user asked, “Why are [dealerships] allowed to make these surprise market adjustments when my residual buyout price was clearly stated in the lease contract?”
In short, making “surprise” undisclosed adjustments to a lease buyout statement is illegal.
“You don’t have to pay [the dealers] to buy the vehicle. Some dealers are telling their customers they must pay no matter what, that the state or whoever requires it, and it’s just not true,” Newhart said.
A possible reason for these charges is that the chip shortage in 2021, along with increased used car values, cost money to the dealerships who needed to recuperate the loss in revenue, according to Newhart. When car prices doubled in 2022, more car owners decided to buy out their End-of-lease agreements and keep their vehicles, according to ABC7.
Customers across the country are being charged excessive fees. ABC 7 New York reporter Nina Pineda reported multiple New York Nissan consumers experiencing these lease buyout price hikes, “$1,885.74,” said Nissan customer Gail Kappel, “$4,116.26,” said Nissan customer Lisa Plunkett.
“I felt so stupid,” New York Nissan customer Jose Montenegro told ABC7.
“I just felt powerless,” New York Nissan customer Mark Nieto told ABC7.
Nearly half of the States (Pa., Fla., Ariz., Ark., Calif., Colo., Ill., Hawaii, Ind., Iowa, Kan., La., Maine, Md., Mich., NH., NJ., NY., Okla., Wash., WV., Wis., Vt., and N.D.) require the lease closed in-person at a dealer as opposed to paying the auto manufacturers’ financial company directly due to leasing licenses and agreements, according to US Legal.
“A number of states specifically regulate what charges may be excluded from a dealer’s advertised vehicle price and how the excluded charges must be disclosed to consumers,” The National Auto Dealers Association (NADA) wrote in a “select compliance issues” report.
Failure to comply with the Consumer Leasing Act results in fines of $5,000 or imprisonment of up to one year, according to the FTC.
“In many cases, a plaintiff must prove that an auto dealer willfully and knowingly violated the act in some way, though there are exceptions,” according to JM&A Group, a “dealer first” business focused on helping auto dealerships “find their best path to success.”
Auto manufacturer companies often enlist a dealer to handle the sale, a “dealer-lessee purchase transaction.” The dealer should disclose the “documentary fee” amount, according to NADA.
Dealerships cannot charge additional, undisclosed fees after a consumer agrees to a lease-agreement contract. According to the Consumer Protection Leasing Act of 1976, all leasing fees must be disclosed and agreed upon before signing the leasing contract.
Attorney General Ashley Moody issued subpoenas to the six companies on Nov. 2, 2022, giving them until Nov. 16 to comply, according to Peter Baker, Orlando, Fla. News. 120 complaints were filed with Moody’s since 2021 in Florida alone.
Subpoenaed cases remain ongoing and are continuously filed by auto customers. Florida Attorney General Ashley Moody’s office refused to comment on case results or dealership legal ramifications.
The fees have various names, including “maintenance, safety, dealer, general, processing, taxable, nontax, wear and tear, mileage, inspection, and certification.”
“A ‘disposition fee’ is charged whenever someone buys out a Nissan lease. Every manufacturer will have one; Toyota, Honda, Mazda, Buick,” Jamie Bentie, financial department business manager at Kelly Nissan, Massachusetts, said.
Financing arms of Nissan-Infiniti Financial, GM Financial, and Honda Financial Services contribute to a growing list of other automakers that will no longer allow customers to use third-party companies like Vroom, Carvana, or CarMax to sell a consumer’s leased vehicle.
“The lease-end purchase option price is set forth in the lease contract and cannot be negotiated down,” Michael Sin, co-founder of leasing information site Leasebacks, said.
States have begun to catch this dealership practice, having passed legislation, and filed lawsuits to compensate victims of undisclosed charges. Pa. Fla., Wash., NY., NJ., and Calif., reformed prior leasing laws to protect consumers against these seemingly predatorial charges.
By Alex Fernandez
Comments