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AUTOS: HIGHER RESTOCKING FEES FOR LEASED CARS
Vehicle Code Section 11713.21 (b)(5)
The Car Buyer's Bill of Rights, enacted July 1, 2006, requires a car dealer selling a used car for less than $40,000 to offer the buyer a cancellation option contract. A buyer who buys a cancellation option contract can return the car without cause within two days. If the buyer returns the car, the dealer can charge him or her only a limited restocking fee. The dealer has to disclose the restocking fee upfront.
The Car Buyer Bill of Rights created the following unanticipated scenario, which could allow car lease customers to avoid paying for excess mileage, wear and tear, or damage fees at lease termination:
Mr. Smith signs a three-year car lease. The lease allows Mr. Smith to drive the car 12,000 miles per year, or 36,000 throughout the lease. At the end of the lease, Mr. Smith has driven the car 56,000 miles, causing a $4,000 excessive mileage charge. To avoid paying the $4,000 charge, Mr. Smith exercises his option to buy the car at the end of the lease. He also buys a cancellation option contract. Two days later, Mr. Smith returns the car to the dealer under his option to cancel the contract. He argues that he does not have to pay the $4,000 excessive mileage fee because his obligation to pay the fee ended when he exercised his option to purchase the car. If Mr. Smith is right, the dealer would be required to take the car back without collecting the excessive mileage fee.
This new law provides that if Mr. Smith buys the car at the end of his lease, and buys a cancellation option contract, the dealer can increase the restocking fee by the amount he would have had to pay at the termination of the lease for excess mileage, damage to the car, or excess wear and tear.
This means that if Mr. Smith returns the car within his 2-day right to cancel, he’ll have to pay the extra restocking fee.
For more information:
County of Los Angeles Department of Consumer Affairs
B-96 Kenneth Hahn Hall of Administration
500 W. Temple Street * Los Angeles, CA 90012-2706
Telephone (800) 593-8222 (within the County) * (213) 974-1452
web site: dca.lacounty.gov