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Charging Dealer Fees on Lease Purchase Options

By: Logan S. Parker

Charging Dealer Fees on Lease Purchase Options

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Recently, many dealers have asked if they can charge customers a dealer fee when facilitating a lease purchase option. A dealer fee (or some similar fee) may only be charged if properly disclosed in the lease.

Regulation M, a set of federal regulations governing consumer leases, requires the lessor dealer to disclose in the lease the total purchase price for the vehicle in the event the consumer exercises his or her purchase option. The “total purchase price” of the vehicle not only includes the vehicle purchase price, but any fees that would be charged. The amount of the dealer fee must either be itemized or included in the total purchase price. Simply stating that the purchase price does not include a dealer fee, as you see in many advertisements, will not suffice.

Best practice is to itemize the dealer fee amount near the vehicle purchase price. Most leases already contain a blank for a “purchase option fee,” and the dealer fee can be included there. If you were to lump the dealer fee with the total purchase price, it may cause confusion when the purchase option is exercised. It may also deter other dealers from facilitating a purchase option pursuant to a lease originating at your dealership.

Your state may also require certain disclosures, some of which may be specific to leases, but most of which will be related to dealer fees generally. For example, section 501.976(17) of the Florida Statutes requires a dealer to include the following statement on any document that includes a line item for a dealer fee: “This charge represents costs and profit to the dealer for items such as inspecting, cleaning, and adjusting vehicles, and preparing documents related to the sale.” If a consumer were to exercise his or her purchase option in Florida and this language were not present, both the lessor dealer and the dealer facilitating the purchase option transaction could be found to have violated the Florida Unfair and Deceptive Trade Practices Act.

If you are not confident that your leasing practices comply with state and federal disclosure laws, please contact your experienced dealer lawyer for assistance. Your dealership could be subject to civil liability and government fines if you violate these laws.