QUESTION:I was in a lease for about two years with a Dodge minivan. Having tired of driving a van, I went to a local mega-dealer two weeks ago and signed up to buy a new Honda. The dealership agreed to take the van as a trade-in, and contacted the leasing company for the lease “pay-off.” It was $19,000.

We completed the deal and I took the new Honda home. I’m really happy
with the Honda.

The dealership is going ballistic, and is now demanding that I return
the Honda and take the van back. Here’s the problem: although the
balance on the lease with penalty is $19,000, there is an additional
$6,000 due the leasing company to release the title to the dealership.

I don’t want to pay an additional $6,000 to get rid of the van, and
think the dealership should pay this. A deal is a deal, right? K.D.,
Springfield

ANSWER: Let me present this issue from the dealer’s perspective. The dealership agreed to accept as a trade, the minivan. This means that the dealership expected to pay the $19,000 and receive the title. This won’t happen since, for the dealer to ever get the title to a leased
vehicle, it will have to “buy” the minivan from the leasing company.
This amount in controversy — the “residual” — is the additional amount
due when the consumer wants to own the leased vehicle. Essentially,
this means that for you to own the minivan and present title, you (or
someone) will have to write a check for the full $25,000 to the leasing
company.

I think you will have a difficult time holding a dealership liable for
the additional $6,000. Absent a fraud issue, the dealership’s attorney
will probably argue mutual mistake of fact, to have the buyer’s order
contract set aside. This would seem likely since both the dealership,
and you, did not know the full amount required to purchase the title from
the leasing company.

You have several options. The easiest is to return the Honda and take
back the van along with any downpayment you may have made. Since all
the dealer really wants is the Virginia title, with no liens, to the
minivan, you could of course make an additional payment to
the leasing company. When it receives the dealer’s $19,000 and your
$6,000, it will give up the title.

To trade this minivan in to any dealership, you will first have to
obtain the lessor’s title, directly or otherwise; the cost will be
$25,000.

Leases continue to complicate otherwise simple car deals. You may
want to have an attorney review all of the paperwork to make sure the
dealer’s contention is correct.

Since we are discussing leases, let me raise one additional point for
consumers contemplating a lease for a new car or truck. Some
dealerships have been known to mark-up the selling price of a new
vehicle when the sale is to a leasing company. For example I
represented a consumer two years ago who wanted to buy a $57,000 Lexus,
and was talked into a $67,000 lease for the same vehicle. The
dealership had pocketed the extra $10,000, and lied to the consumer when
she repeatedly challenged the figures. She was lucky — the dealership
refunded the additional amount (and her legal fees) once she retained
counsel.

The law is not one-sided. It attempts to balance the rights of parties
in disputes. From these facts, I think it would be unfair for the
dealership to have to pay an additional $6,000 to get the title.
Before attempting to trade-in a leased vehicle for a replacement, it is
always wise to contact the leasing company first and to pin down the
exact amount required to get the title. Ask for the lease pay-off
amount (the balance of payments due, plus early termination penalty) and
the “residual” (the buy-out figure). Note too that the residual amount
is printed on the front page of the lease.

A deal is a deal… unless there is a mutual mistake of fact.

Good luck and thanks for contacting Automotive Law.

CONSUMER INFORMATION: In the Washington Metropolitan area, numerous “buying services” for new cars exist. Readers of Automotive Law with good (and bad) experiences with these buying services are encouraged to share these experiences. Automotive Law can be contacted by email, telephone, or letter as noted below.

Disclaimer: The responses to legal questions on automobile law, and the information provided by Womanmotorist.com and Mr. Swann, are offered only for general educational purposes. They are not offered as and do not constitute legal advice or legal opinions. Mr. Swann is licensed in Virginia and Tennessee, and this information should not be considered as a substitute for specific legal advice from an attorney licensed in your jurisdiction. For assistance in locating your own automobile law attorney, you should contact your state, county or city bar association, or the Center for Auto Safety,
Washington, D.C.