NADA recently sent a memo to its members identifying several compliance considerations that have arisen under current market conditions. We wish to highlight and provide additional information on one of the issues that the memo addressed – namely, whether dealers may charge documentary or other fees to consumers who exercise an option to purchase at the end of their lease agreement. While this issue is not new, it surfaces more frequently when – as is occurring in the present market – a consumer is incentivized to exercise a purchase option because the actual value of the leased vehicle at the end of the lease exceeds the residual value that was calculated when the lease was entered into and disclosed in the lease agreement.
In order to more fully explain the requirements and limitations that apply to fees that a dealer may charge a lessee who exercises an option to purchase, we have set forth below the relevant excerpt from NADA’s A Dealer Guide to Federal Consumer Leasing Act Requirements. As the excerpt generally explains –
- the lessee has a contractual right to purchase the vehicle from the holder of the lease for the purchase option price and any purchase option fee that are disclosed in the lease agreement; and
- except for official fees, charging additional amounts to the lessee for exercising the purchase option exposes the dealer to potential claims for breaching the lease agreement and for violating the disclosure requirements set forth in Regulation M.
The excerpt provides important details regarding these limitations. Dealers are encouraged to review with legal counsel their current procedures for handling options to purchase leased vehicles.
Chairman, Regulatory Affairs Committee
 Regulation M implements the Federal Consumer Leasing Act.