Bad surprise: unexpected costs to buy your car after a rental

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Bad surprise: unexpected costs to buy your car after a rental

A consumer protection organization in Ontario estimates that the costs administration requested by dealers at the time of purchase represent a “loophole in the law”.

A consumer had to pay hundreds of dollars in administration fees at Marino's Fine Cars Subaru dealership in Etobicoke when he wanted to purchase his vehicle at the end of his lease.

In 2019, Samuel Morgenstein signed a three-year lease agreement to get his Subaru Outback SUV. Three years later, he decided to buy his vehicle when its lease was about to end. It was then that he realized that his purchase agreement included a “lease buyout fee” of $615, a fee that was not included in his original agreement.

I was puzzled. I asked the dealer for explanations, telling him that I did not understand why I had to pay these additional costs, he says.

I couldn't find details of these charges anywhere in my rental agreement.

—Samuel Morgenstein

Mr. Morgenstein says he never got a concrete answer from the financial services manager at Marino's Fine Cars Subaru dealership in Etobicoke, with whom he had dealt.

The Torontonian < /strong>then wanted to know if the dealership could offer him a waiver of these fees. The manager of financial services then told him that it was impossible.

He told me he had no control over it, he continues. If I remember correctly, he said that it was a fee he had to charge.

To Mr. Morgenstein, these fees did not seem to be related to those charged for ensure that the vehicle meets the requirements of the certification program, as stipulated in the contract. These fees did not appear to be related to anything, he maintains.

He alleges that the dealership never responded to his email and instead was called to discuss the situation over the phone.

Mr. Morgenstein was also not in a good position to negotiate. I had to buy my vehicle, my lease was about to end. He had waited until then to make the purchase in order to optimize his loan and did not expect to be taken aback.

So he was forced to pay the $615.

Overall I would say I was unhappy and surprised. This was not the way I wanted to end this rental. »

— Samuel Morgenstein

Enlarge image

In this image, we see that the initial rental agreement did not mention a lease buyout. Contrary to what the licensee maintains in its response to Radio-Canada, the clause does not appear there.

Through his lawyer, the dealer maintains that he is unable to discuss specific transactions. He adds, however, that the dealership's standard lease agreement contains a buyout clause that provides for the charging of an administration fee during the buyout transaction. Finally, he points out that the Ontario Ministry of Transportation requires a safety inspection and transfer of ownership which incurs a fee that is ultimately paid by the customer.

This dealership is not alone in charging this kind of fee at the end of a lease.

Even if these charges are not in the original rental agreement, they are legal, says Maureen Harquail, president and CEO of the Ontario Motor Vehicle Industry Council (MOCVA), the consumer protection organization.


However, it does share an important nuance: the dealer never signed the contract in question.

Often, rental contracts are signed with an automaker finance company, she explains.

She cites the example of Ford. We could sign a lease contract at a manufacturer's dealership in Toronto. However, the contract will be between Ford Credit Canada and the customer. The dealer's role is to act as an intermediary for this transaction.

The dealer is not a party of the contract.

— Maureen Harquail, President and CEO of the Motor Vehicle Industry Council of Ontario

She therefore believes that it is likely that there will be additional costs if the concessionaire deems that there is work to be done on site or that there are expenses related to the process of buying out the lease.

Ms Harquail says there is therefore a problem, a loophole in the law. This is something that has not been provided for in the law. However, it tempers this comment by adding that the work carried out by the concessionaire at the time of this transaction is not taken into account in the law either.

The President and CEO of COCVA confirms having received calls from some consumers regarding this situation, but says that they do not form the majority of the complaints received.

COCVA President and CEO, Maureen Harquail, reminds anyone who wants to buy their vehicle at the end of their lease that they can go to different dealerships to find the best purchase price.

So it's not our highest priority, she says.

She reminds consumers that there is no is not necessary to do business with the dealer with whom the initial contract was signed to complete the purchase of the vehicle. You can go to any dealership.

In some cases, she says, it would also be possible to do this transaction directly with the car manufacturer's finance company.

The situation is different in Quebec. The Office de la protection du consommateur states that the purchase option allows the consumer to buy the automobile at the end of the lease contract, at the price fixed in advance and that all the information must be find in the rental contract.

However, the Office warns Quebecers that many merchants are still trying to illegally add surprise fees to the bill, despite the risks involved.

Alex Bukin took over the another customer's lease agreement for a 2018 Hyundai Elantra Sport on April 15, 2019. The four-year lease was due to expire on September 26. The young man took steps in advance, a month before the deadline.

He first went to the nearest dealership, Rexdale Hyundai in Etobicoke.

They then sent me an email with an estimate of $600 to buy out the lease, he says.

In the email, the facility's financial services manager asked him for $599 in lease buyout in addition to fees for registration rights.

In response, I wrote to him that I did not think he had the right to charge me these fees. I checked my rental agreement and this fee was not listed anywhere, argues this Torontonian.

< /strong>I told him he had no right to do that. He replied that these fees are mandatory.

—Alex Bukin

Alex Bukin then went to Gyro Hyundai, the dealership with which he had signed his lease agreement in 2019. The financial services manager then told him that the lease buyout was going to cost $500.

I then asked him why there was a $100 difference between him and the other dealer. He replied that by signing the papers here, I got a $100 discount.

Mr. Bukin then advised him that the charges were, in his view, illegal. He was told that no one was working for free and that there were costs attached to this process.

The fact that dealers were offering different prices already smelled bad to me, says he.

He then inquired with the Finance Department of Hyundai Motor. I was reassured that dealerships were not allowed to charge me these fees. The financial entity assured him that it would contact him later.

Alex Bukin finally found a dealer from whom he could buy his vehicle without paying an administration fee after two unsuccessful attempts.

Meanwhile, Mr. Bukin did his own research online and came across a post on Reddit with similar complaints about Hyundai dealerships. The author of the publication has also explained his process to avoid additional costs. Mr. Bukin then posted his story on this page, and the author suggested that he go to Dixie Hyundai in Mississauga.

He assured me that the manager, Drew Pearson, was a good person and was going to be able to help me. He wasn't going to charge me that fee, says Alex Bukin.

Following the advice, he showed up at this dealership and did not need to pay any administration fees for the transaction.

Meanwhile, the finance department of Hyundai Motor emailed him to say that Gyro Hyundai was no longer going to charge him that fee. But Alex Bukin was glad he went to a dealership near him instead that never charged him that kind of fee.

The 401 Dixie Hyundai dealership in Mississauga is one of those that doesn't charge an administration or lease buyout fee.

For Drew Pearson, not charging this administration fee is a long-term investment for his dealership.

Don't forget that word of mouth is important. It can spread like wildfire and can be positive or negative.

— Drew Pearson, General Manager of 401 Dixie Hyundai

In response to a question about what he would say to dealerships who continue to charge these kinds of fees, Drew Pearson says it's important that dealers, as representatives of the manufacturer, remain consistent in their message to the public.

He is satisfied with the way lease agreements are currently written.

A spokesperson for Hyundai Canada says the manufacturer and its finance company recently issued a national bulletin outlining legal requirements for dealers, including prohibiting them from charging vehicle purchase fees for leases printed before November 28, 2019.

In the email, National Public Relations Manager Jennifer McCarthy explains that lease agreements printed prior to this date do not mention a “vehicle purchase fee”.

“As a result, dealers cannot charge this fee to customers who choose to purchase their leased vehicle before November 28, 2019.”

— Jennifer McCarthy, National Director of Public Relations, Hyundai Canada

Contracts signed after this date include a purchase fee of $325. So, she says, dealerships can charge customers up to $325 to buy their leased vehicle on November 28 or later.

She adds that there is indeed additional fees and taxes associated with the purchase, including safety certification and related fees, emissions certification, and the cost of licensing and registration.

However, we have reminded our dealers that in our commitment to clear and transparent communication with our customers, they should only charge the fees explicitly disclosed in their original rental agreement, McCarthy argues.

“All amounts related to vehicle purchase fees must be clearly itemized and disclosed to the customer at the time of the transaction to comply with applicable consumer protection laws.

— Jennifer McCarthy, National Director of Public Relations, Hyundai Canada

For its part, Subaru Canada says it supports its dealer network and remains attentive to the customer to solve specific problems.

Spokesperson Julie Lychak reminds customers that are not in default of payment of obligations under a lease can purchase their vehicle and that the process includes certain fees, listed in the contract.

She adds, however, that customers may also be required to pay a lease buyout fee to the dealership, which offsets the costs associated with administering the option. of purchase.

Leases signed after March 2020 cap dealership administration fees at a maximum of $300, Lychak concludes.

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