California car dealership sues BMW, Mercedes over lease buyout restrictions

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Image of article titled California auto dealership sues BMW and Mercedes over lease buyout restrictions

Photo: Kristen Lee / Jalopnik

If you rented a car, There was a time when you could trade in that leased car at any dealership instead of returning it to the brand you bought it from. Due to the shortage of used cars, several car manufacturers no longer allow these lease buyouts by third parties, and a California luxury car dealership has filed a lawsuit against Mercedes and BMW over the new restrictions.

Back in July, I have written about how automakers are changing the way they handle what is called a “third party lease buyout”. These new policies severely limit a lessee’s ability to use current used car market conditions.

Before the market went crazy and inventory ran out, if you leased a car, you had three options when you entered into the lease. First of all, you could gReturn it to a dealer of the same brand. Second, you could bbuy it yourself from the leasing company (the financial arm of the car maker), or, well, you couldn’tsell or sell your car to another dealership.

Previously, it didn’t matter to the leasing company which part paid the redemption amount. However, now that dealerships are desperate for second-hand inventory, dealers have pressured leasing companies to pass restrictions so cars stay in this brand’s pipeline – where renters can have better deals on their rental from other dealers like Carvana, Vroom, Carmax, or any dealership not aligned with the brand they rented from.

A number of automakers including Honda / Acura, Nissan / Infiniti, BMW and Mercedes have recently adopted policies prohibiting third party lease buyouts. According to a recent report by Automotive News, a California luxury car dealership has filed a lawsuit against BMW and Mercedes, claiming that the restrictions violate California law. The dealership has asked the California Central District Court to permanently block these restrictions and award attorney fees. Iin addition, it is also seeking a class action lawsuit against all dealers aggrieved by these restrictions.

In the suit, Calabasas Luxury – the dealer in question – claims that BMW and Mercedes have “overwhelmed the used vehicle market by denying renters to trade in their vehicles with anyone other than affiliates of the defendants.” In doing so, Calabasas Luxury Motors claims that these restrictions are in violation of “Language of the California vehicle code governing trade-in, wording that refers to vehicle purchases or trade-in” subject to prior credit or lease balance. ” “

BMW and Mercedes, the defendants in this case, did not provide a response statement to AutoNews. It will be interesting to see how this case unfolds and whether other dealers who could benefit from the removal of these restrictions also take legal action against the automakers, as a win for dealers would be a win for consumers as well.


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