Buying out a vehicle lease? Why you could be charged a service or admin fee

As interest rates continue to rise, more and more consumers in Ontario are visiting dealers to purchase the vehicle they already have on lease.Lately, OMVIC’s consumer support team has noticed an uptick in questions from car-buyers about a service or admin fee being added to their lease buyout contracts. So, we wanted to offer some advice.

Leasing a vehicle (new or used) is like a long-term rental, because you don’t actually own the vehicle. However, it can save you money in the long run because you have the option to purchase the vehicle at a later date based on its residual value.

Residual value is calculated by taking the car’s value at the beginning of the lease and subtracting its depreciating costs. The longer you (i.e., a lessee) are into a lease, the lower the cost of the vehicle.

Why a service or admin fee may be added to a lease buyout

Generally, people return to the dealer where they originally leased their vehicle to arrange a buyout. However, often the dealer and the company that owns the vehicle are not the same organization. In many cases, a dealer just facilitates the lease on behalf of a leasing company. Because the dealer is not directly involved in the agreement in this instance, they can charge a fee during the buyout process for doing the work it takes to complete the transaction.

If the leasing company is the dealer, then the fee should be in the lease contract.

Options for consumers

Admin fees are always negotiable, and you are not obligated to complete the buyout through the dealer where the lease was signed.In fact, consumers can shop around different dealers (of the same manufacturer) or even call the leasing company directly, to see if they can do the buyout without having to incur any extra admin fees.

As with any contract

Speak to the leasing professionals at your dealership to assist you with detailed questions or concerns before you enter into a lease agreement. When entering into any agreement, ensure you understand the terms and conditions before signing, as sales are final and there is no cooling off period in Ontario.

The Consumer Protection Act is clear: all fees must be disclosed in the lease contract. However, if the lease agreement is between a manufacturer’s leasing company (e.g., Honda Canada Finance) – not the dealer – and the lessee, the dealer (a third party) can charge a fee for completing the buyout for the leasing company.

Other fees at the end of a lease may be imposed by the leasing company and are terms of the lease contract. These can be related to the condition of the vehicle, additional mileage (beyond what was agreed upon in the contract), or if the vehicle is being traded before the term is over.Read more about lease contracts and terms on the OMVIC website.