Leasing your car seemed like a good idea.
You visited the car on the lot. The dealer liked you, and he even gave you what you thought was a pretty good deal. You looked at the numbers and thought...
"Wow, I could rent (which is what leasing is) a new car for two or three years and then return it to the dealer, paying less upfront than I would for a down payment to buy new car, and my monthly payments would be lower! No-brainer."
You signed the paperwork and drove away to begin the rest of your life. You paid your monthly lease bill on time. No complaints, really: you were happy, and the dealer was happy.
Then your car lease ended.
That same dealer, who before treated you so well, now realizes that this is his last chance to squeeze a few more dollars out of you before you walk out that door free and clear of any future financial obligation to him. "Hmmm," he thinks, "how can I squeeze a few more dollars out of this deal?"
Bam! He remembers this clause in your auto lease agreement that says something about "excessive wear and tear."
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Lease termination, end-of-lease bills, rate negotiation--whatever your lease issue is, we've probably handled it before and can give you straightforward advice on the best way to get what you want.
Auto leases, while enticing, are not problem-free.
Lease agreements usually give dealers the right to charge you for "excess wear and tear" on the car at the end of the contract. And this is problematic, of course, because what might seem like normal wear and tear to you may be seen by your dealer as "excessive." In other words, the fox is charged with guarding the hen house:
“Like a fox guarding the hen house” or “Don’t let the fox guard the hen house” is an idiom. If you assign somebody a duty and doing so puts that person into a position where he or she then can exploit the situation for his own benefit then you let the fox guard the hen house. What is more: not only can that person exploit the situation, he/she likely will–like the fox who can’t help himself looking at all those yummy chickens.
For example, an unethical dealer could easily decide that the original deal was not as profitable as he thought and thus claim "excessive wear and tear" to try to make up a little of his perceived "losses" at the end of the lease.
Is this legal?
Most leases limit the number of miles you may drive the car. If you exceed the mileage allowance in your contract, then your dealer will charge you a penalty fee for each additional mile you drove. Given this factor, Lease Advisor describes another trick shady dealers try to use to squeeze you for a few more dollars:
"Mileage allowance is the salesman's best trick into lowering your monthly payments, but don't be fooled! What you don't spend now, you may spend later. The lowest mileage typically chosen is 12,000 miles per year. The average American travels roughly 18,000 miles a year. At a cost of .15 per extra mile, this difference would end up costing you $3,300 at turn-in."
One thing to keep in mind here is how average mileage is affected by drivers whose leases have low mileage allowances. There is varying data quarter-to-quarter, but most sources estimate that 25%-32% of all new cars are leased rather than purchased, which means that a quarter to a third of the pie has a strong financial incentive to not behave naturally and drive however many miles they otherwise would have driven had there been no mileage allowance in their leases.
So the takeaway is that if you are considering signing a new lease, keep in mind that you should probably err on the high side when estimating how many miles you will want to negotiate for as your allowance. Dealers have a strong incentive to persuade you to estimate your mileage needs low so that they can charge you overage fees when your actual mileage turns out to be high.
As to whether either this mileage allowance trick or the liberal application of the dealer's discretion to deem wear and tear excessive is legal, consider that this is one of those common situations in which what is legal is whatever you let your adversary get away with. So if you fail to outsmart your unscrupulous dealer here, then you simply lose.
But if you hate losing as much as I do, then here is how to win.
Before you return the car...
As the end of your lease approaches, schedule an appointment with a mechanic you trust (or at least one you trust more than your shady dealer). Ask your mechanic to inspect the leased vehicle thoroughly, "top-to-bottom." And request a written report on whatever he finds. Keep a copy of that report yourself, and ask your mechanic to also keep a copy.
If your mechanic finds any problems with the vehicle, ask him (or her) if he thinks that these problems are the types normally associated with a vehicle of this particular age and mileage. You are looking for as unequivocal of an answer here as possible. A "yes" or "no" would be ideal, supported by his explanation for that conclusion.
If your mechanic thinks that there is excess wear and tear to any part of the vehicle, ask him for a written estimate to replace or repair that item. (Of course, you can then go ahead and pay to have the item replaced or repaired before you return the vehicle to the dealer; but keep in mind that you are not required to do this; whether you do it is more of a chess move that you will have to just decide on). The point of obtaining this estimate is so that you can defend yourself against any outrageously high repair/replacement bills the dealer might later lob at you.
Let me reiterate this so that there is no confusion, regardless of what your mechanic does or does not find, get a written statement of his opinion. This will be your ammunition if your dealer later tries to pull a fast one.
And here is the last thing you want to do before you return the car--preferably, on the day that you return the car.: take photographs or video of the car inside and out. This gives you visual proof of the state in which you returned the vehicle. So now, combining the mechanic's written statement and your visual evidence, you have a strong position from which to defend yourself against any shady claims your dealer might later make regarding excessive wear and tear.
But you are not done yet...
When you return the car...
Do no wait until the last day of your lease to return your car to the dealership. Why? Because it gives you a chance to see what your dealer plans to do and allows you time to counter-plan.
You see this often in and NFL football or college basketball near the end of the game. For example, you know how in a college basketball game, when there is under ten seconds left in the game and one team has the ball out of bounds and has to go the length of the court and score, and your coach decides, "we are going to go on the court, get in our set, take a look at the defensive set our opponent takes, and then call another timeout to counter-plan?" Well, returning your leased vehicle early gives you a similar upper-hand, because it gives you a chance to see what the dealer will say or do, and then, because you returned the car early, you still have time to counter-plan and react. In fact, it is probably a good idea to return the car a few weeks early so that you have plenty of time, especially if your counter-plan involves ordering any repairs yourself before the official end of the contract.
When you head back to the dealership, take a copy of your mechanic's written report. But do not show your cards right away. Keep the report in your purse or pocket until you need it to counter or compare any claims your dealer might make.
Ask the dealer to have a "qualified employee" inspect the vehicle and note any evidence of excessive wear and tear--and do this before you leave the lot! Make sure the inspection is thorough. Have the inspecting employee put the car on a lift and check its undercarriage, brakes, and and any other hard-to-get-to part that a walk-around inspection might miss. You want to leave no room for, "oh yea, one more thing" once you leave the lot.
If the dealer refuses this request, ask him for a written statement that waives any claims of excessive wear and tear. And to be specific, you ideally want this written statement from a manager or anyone else at the dealership with the authority to speak for and bind the dealer to an agreement. Once you have this written statement, next ask this same person to authorize the return of any refundable security deposit.
"But what if the the dealer refuses to give me this written statement?"
A refusal might merely mean that the dealership is busy that day with other vehicles to inspect and repair; so your response in that case--if that is the reason the dealer cites for his refusal--should be to ask the dealer to schedule the inspection for his next opening. Again, if you return the vehicle a few weeks in advance, it is unlikely that the dealer would not be able to comply with this request before your contract ends, because dealership service departments do not tend to stay that busy all of the time. The other force working in your favor here is that the dealer might want to earn your business again int eh future and therefore has an immediate incentive to happily comply with any reasonable request you make.
Of course, a refusal could also mean that the dealer is angling to fleece you by making any possible claims he can, as you feared, to squeeze you for a few more dollars. In that case, this again speak to the advantage of you returning the car a few weeks before the contract ends. Go home, and take the car with you. Write a letter or email to the dealership manager or owner and simply layout a time line to the effect of:
- I signed this lease [date].
- I attempted to return the vehicle to the dealership early, on [date].
- But when I asked [name of dealership employee you spoke to] to inspect the vehicle and provide me with a written statement of his findings, he refused.
- And, as a contingency, when I asked [name of dealership employee you spoke to] to instead schedule a time to inspect the vehicle before the contract ends, he again refused.
- I am trying to make every reasonable effort to comply with my obligations under the contract, including offering to the return the vehicle to you early, but [name of dealership employee you spoke to]'s refusal seems unreasonable.
- Am I missing something?
The point of this letter is not necessarily to accomplish anything--although it may if you grease the right wheels. The point is to time-stamp, in writing, the fact that you went out of your way, early, to comply with your contractual obligations. Although the dealer's refusal does not necessarily mean that something shady is afoot, what the letter does is eliminate a whole slew of other excuses the dealer might later offer if this turned into some sort of dispute down the road. In other words, as part of the dealer's position, he would have to give a good reason why he refused your perfectly reasonable request, and he might just not have one--which is what this letter ferrets out as evidence in that eventual dispute.
"What the hell did you do to this car?" (dealer claims excessive wear and tear).
Regardless of the timeline that leads to this next part--regardless of whether you get some sort of written statement early or not--here is what you do if the dealer says that the car shows excessive wear and tear:
- Ask the dealer to provide you with a written list of the items showing excessive wear and tear, along with his estimated cost if the needed repairs/replacements were performed by the dealership.
- Compare the dealer's list with the report provided by your mechanic (the one secretly folded in your pocket or purse).
And to be clear, you need not make this comparison impulsively in a fit of rage. If you like to pull out the mechanic's report while you are still standing in the dealer's office, then you can do that. But you can also make this comparison later, once you get home and have some time to think calmly. The dealer does not need to be part of the comparison you make unless/until you are ready to point something out to him.
If the dealer has listed items that your mechanic said were in normal condition, you will want to make a note of these and point them out to your dealer. If the dealer and your mechanic agree about an item and you decided not to fix it before returning the car, then check the dealer's repair/replacement estimate against your mechanic's estimate. If the prices are similar, then you may want to let the dealer do the work.
But if the dealer's price is significantly higher than your mechanic's, then offer to have the repairs made and return the car to the dealer before the lease expires. (Broken record here, I know...but you cannot do this unless you return the car early; and since your lease term has not yet technically expired, the dealer cannot prevent you from doing this). One other scenario that would also work out in your favor would be if the dealer decides to simply honor your mechanic's estimate and only charges you that amount to do the work himself (because the dealer might want whatever shred of profit margin there might be in that repair work).
Once you have returned the car in for good at the end of your lease, ask the dealer (or leasing company, because sometimes they are two separate entities operating out of the same location) to provide you with a written release stating that the car was returned and accepted and that you have no further liability for any charges associated with the lease. Make sure this document is signed by the leasing company's manager or owner so that there is no opportunity for the company to later claim that the release was provided by someone not authorized to provide it (trust me, there are some shady people in the world, and I have seen company's try to make this argument).
Bam! You are now pretty much done. The dealer or leasing company is usually obligated to refund any security deposit to you within thirty days of the date you returned the vehicle. If you do not receive your money within thirty days--and you might want to go ahead and do this around day 20--then you should write a brief letter to the dealership reminding it of this obligation. Clearly indicate that the payment must be paid to you within ten days. Enclose (or attach, if you are sending an email) a copy of the dealer's release, and send your letter by certifiable mail, return receipt requested.
Quick note: if you are thinking, "wow, that sounds like a lot of thinking and writing," but you still want to make sure you get every dollar you are entitled to, then keep in mind that Veeto automates all of this for members.
"But what do I do if the dealer still does not send me my money?" If the security deposit is not forthcoming, then contact your state automobile-dealer licensing board and the consumer protection division of the state attorney general's office (again, something Veeto automates for members). Like cockroaches scattering from sunlight, this extra bit of attention from the agencies whose job is to regulate dealers might convince the dealer that it is finally time to return your deposit.
"If all else fails..." What most bad advice begins with.
Now this is the part where most articles on this topic would say something like, "if all else fails, consider filing a lawsuit against the dealer to recover your security deposit;" or "if all else fails, consult an attorney." And if you are a regular reader of Veeto's blog, Nothing But Teeth, then you already know why both of these tend to be useless as advice for the people reading those articles. But in case you are new, I will catch you up.
If you have already hired an attorney, then you would not be reading how-to articles on this topic. And conversely, if you are reading how-to articles on the topic, then you have probably not already hired an attorney.
OK, so that means we should consider the case of a person who is reading a how-to article and has not yet hired an attorney. Then why is "you should consult an attorney" bad advice? Not in all cases, but in most cases, the economics make sense. For most normal people (i.e. not wealthy, litigious people like Donald Trump), the cost-benefit analysis goes something like this:
- How much money is at stake?
- How much will it cost me to pursue that money?
- How likely am I to win?
This becomes a simple equation, something like: ("dealer owes me $2,000" - "attorney and lawsuit will cost me $1,000) x "there is a 50% chance I will win." If these were the numbers, then your calculated expected return would be $0. So the reason "consult an attorney" is often bad advice is that there is not enough money at stake in a low-value claim to justify the expense of hiring an attorney.
So the takeaway is that "consult an attorney" is only good advice when the amount of money at stake is higher, say $10,000 or more--and even that might too low of a minimum.
The second reason these are both examples of bad advice is that they fail to make clear that there is a required step 1. If you go to court without any evidence--any of the written documents I have suggested here--you will likely lose. Similarly, if you "consult an attorney," he will not advise you to proceed unless/until you go back and put together that evidence. So in either case, you need to begin with step 1 before you consider any subsequent step, and step 1 is to get a bunch of stuff in writing (last reminder: again, this is something Veeto automates for members).
So now that you are up to speed, I can come back and say that, yes, sometimes filing a lawsuit or consulting an attorney makes sense. But if you do either without having taken care of step 1, then you are wasting your time and money, and will not likely win your auto lease dispute. Hopefully this article equips you with a clear idea of what kind of written evidence you need to satisfy step 1 and to ultimately fight back and win.
OK, last tip--promise. Most leases require that you return the car with matching tires. If you have replaced a tire or two, the dealer will usually insist on charging you full price for an expensive matched set. In this case, buy a set at a discount store before returning the car. Boom! You outsmarted your dealer again.