BMW, Mercedes sued over lease buyout rules

Asked whether Calabasas Luxury had sought an opinion on the lease policy from the captive finance company itself instead of a Mercedes dealership, Calabasas Luxury attorney Robert Starr said he’d heard from “many people in the industry” that Mercedes would not accept third-party buyouts.

Calabasas Luxury also quoted BMW Financial Services in November as saying the automaker restricts “purchase of [a] leased vehicle or return or trade-in vehicle to an authorized BMW Center. BMW Financial Services will not honor payoffs received from third-party dealerships. In the event a payoff is received from a third-party dealership, BMW Financial Services will return the payment by mail to the original sender.”

This is consistent with what BMW had described to Automotive News in September.

“Our primary goal is to support BMW franchise dealers by creating opportunities to keep more vehicles in our franchise network,” BMW spokesman Phil Dilanni wrote in an email. “Therefore, we’re prioritizing franchise dealers on our online auction platform to ensure they have more opportunities to purchase off-lease vehicles. In addition, we will temporarily suspend payoffs from third-party dealers as of October 1.”

Calabasas Luxury’s November lawsuits accuse both automakers of having “cornered the used vehicle market by refusing to allow lessees to trade-in their vehicles with anyone other than Defendants’ affiliates.” BMW and Mercedes were interfering with both dealership and customer rights, the lawsuits said.

Calabasas Luxury said both policies violate California Vehicle Code language governing trade-ins, wording which references purchases or accepting trade-ins of vehicles “subject to a prior credit or lease balance.”

“It should be noted that although [the vehicle code] does not explicitly vest within all licensed dealers the ability to accept trade-ins, it must necessarily be assumed that the legal right to accept trade-in vehicles must exist,” the dealership wrote in its lawsuit against BMW Financial Services. “In other words, it would be implausible for the Legislature to regulate dealer conduct with respect to accepting vehicle trade-ins if dealers did not have the right to accept ‘trade-ins’ in the first instance.”

The dealership made a similar point in the Mercedes case.

Calabasas Luxury also cited in both cases language in California Civil Code referencing situations where “prior to the scheduled expiration date specified in the lease contract, the lessee terminates the lease and purchases the vehicle or trades in the vehicle in connection with the purchase or lease of another vehicle.”

Customers have the right to buy the leased vehicle or trade in the vehicle early, the dealership argued.

Eleanore Beatty

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