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Auto lease leash

Lorne Marr thought he could have someone else buy back his Mercedes E550 lease before it expired May 2, 2014, and make a little profit while he was at it, but then Mercedes stepped in.

"I have a three-year lease. My car has a buy back of $38,000 and very low kilometres. It's worth about $43,000 and on May 2nd I have a buyer who would be willing to buy the car for about $42,000, so I'd make about $4,000," says Marr, a marketing consultant for a Toronto-area insurance company. "What would happen is, Mercedes would sell the car to him for $38,000, plus the HST, and he would write a cheque to me for $4,000, so Mercedes gets their $38,000 and I'd get my $4,000 -- everybody's happy."

Except everybody's not happy because Mercedes refuses to sell the car to Marr's buyer and will only sell it to Marr himself.

Marr received the news in an email from a Mercedes sales representative and is now wondering what the problem is. "They have the right to do that, but as a common courtesy to someone who has bought four Mercedes you'd think they'd not be so difficult because it's not costing them any money either way."

The six-month restriction
So why is Mercedes standing in the way? Lease contracts don't allow anyone to transfer the lease or buy-back the car in a lease's last six months, something Sharon Lucas, sales manager for Leasebusters.com (a lease takeover website) sees all the time. "Many manufacturers have the six-month clause, Mercedes-Benz is not alone with this restriction, but most lessees are unaware of this limit."

If you think there's equity
Marr has equity in his car because it has only 45,000 kilometres. However, he and other leaseholders need to be aware that the estimated buy-back value is pre-determined long before the lease expires.

"If the lessee anticipates having equity in their vehicle usually due to low kilometres driven, they should enquire with the leasing company at the beginning of the lease to verify that they have the ability to sell the car directly to a new owner prior to end of lease," says Lucas.

The transfer fee
Some car companies, like Lexus/Toyota, will sell the car directly to a new owner, but will charge a transfer fee -- usually between $400 to $1,250 plus tax. For some dealers, this includes an administration fee.

"We always recommend the seller contact their dealership to confirm their transfer fee with the business manager," says Lucas.

A final warning
In the end, Lucas says Marr does not have a lot of influence in his car's future, even if there's equity in it. "He doesn't have much control since he does not own the car, and has been simply leasing the car for the selected term. Some of the equity may be put towards purchasing/leasing a new Mercedes Benz, but there is no guarantee the dealer will see the same amount of equity or even offer this savings."

Aaron Broverman is a freelance writer in Toronto.

-- Posted May 5, 2014
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