Consumer complaint received 2021-10-27
Company: BMW Financial Services NA, LLC
State: NJ
Product: Vehicle loan or lease
Sub-product: Lease
Issue: Problems at the end of the loan or lease
Sub-issue: Problem when attempting to purchase vehicle at the end of the lease

Complaint:
On XX/XX/XXXX, I leased a XXXX XXXX  XXXX XXXX-Drive from BWM of Bloomfield. That lease was assigned to XXXX XXXX XXXX ( XXXX FS ). My leased vehicle was declared a total loss by my insurance company on XXXX as a result of water damage from XXXX XXXX in XXXX, NJ. 

My insurance company ( XXXX ) determined the replacement value of the vehicle is {$79000.00}. I have a right under my lease agreement to purchase the automobile for a contractually determined payoff amount which as of today is {$64000.00}. Accordingly, my insurance payment exceeds my payoff amount by {$14000.00} ( the Excess ). 

XXXX XXXX XXXX issued a Letter of Guarantee to my insurance company ( and its title procurement company, XXXX ) indicating it would release its lien on the automobile and transfer title to the insurance company only if the insurance company pays over to XXXX FS the entire payoff amount. In several electronic communications, XXXX XXXX has told me it intends on retaining the excess proceeds it receives from my insurance company, thus providing it with a substantial windfall. 

BMWs lease ( attached ) does not entitle it to retain the Excess. The lease contains provisions requiring me to maintain insurance on the vehicle, naming XXXX XXXX as an additional insured ( section 21 ) and provides that I am responsible for maintaining the vehicle ( section 20 ). It also provides an express gap amount waiver ( section 26 ), which protects me from having to pay any amount in excess of the Adjusted Lease Balance of the vehicle over the insurance payoff amount ( presumable this gap waiver is calculated into the value of the lease ). However, section 26, entitled Gap Amount Waiver is silent regarding what happens if the actual cash value of the vehicle as of the date of loss ( i.e., the insurance payment ) exceeds the XXXX XXXX XXXX. Indeed, Section 26 suggests my liability is determined based on the XXXX XXXX XXXX, which is the basis on which the payoff amount is calculated. 

Sections 28 33 cover how the lease may be terminated and describe payments I can make to purchase the vehicle. Section 31 covers payments on early termination. Although XXXX claims otherwise, nowhere in the lease does it indicate my right to purchase terminates if my insurance company declares the car a total loss. Indeed, XXXX still quotes a payoff amount for my vehicle ( see attached ) over a month after it was declared a total loss ). I have communicated to XXXX that I am ready and able to purchase the car from them directly if they somehow believe that receiving a payment from an insurance company changes my early termination payoff rights ( which frankly makes no sense ). While XXXX recently started cautioning in its payoff quotes that they will not honor those quotes if they receive payments from third-party dealers ( a limitation I might add is NOT in its lease but is XXXX they have unilaterally imposed in light of current market forces ), it does not have a similar limitation regarding any other third-party payments. 

XXXX seeks to receive a windfall to which it is not entitled under a lease agreement that it drafted and is essentially a contract of adhesion. In this case, it seeks to collect an insurance payment of {$79000.00} in connection with an automobile that had an initial capitalized cost of {$80000.00}. In addition, it has received nearly {$15000.00} in lease payments over the past 18 months. This makes no sense economically and no sense under BMWs lease agreement. XXXX had an opportunity to clearly draft its lease agreement to seek terminate consumers purchase rights and to claim any excess proceeds in the event of a total loss ( although it is not clear why it legitimately could do so ), yet it didnt. it has made an economic decision to claim assets to which it is not entitled and thus harm New Jersey consumers following a natural disaster that caused a huge number of totaled automobiles in New Jersey, and an unusually inflated automobile market as a result of a chip shortage and COVID-related supply chain issues. 

XXXX XXXX is seeking to take advantage of the numerous New Jersey consumers who leased BMWs and suffered a loss as a result of the massive flash flooding on XX/XX/XXXX as a result of XXXX XXXXs remnants. Moreover, the reason the insurance proceeds for total losses like mine are so high is that the current car market, because of chip shortages and Covid-related supply chain issues, is relatively illiquid and extremely inflated. Indeed, the automobile I leased to replace my totaled automobile has increased my cost by almost 30 %. That increase should be covered by the settlement value of my totaled car, but XXXX XXXX is seeking to deprive consumers by taking from New Jersey consumers the increased value of their totaled vehicles ( which should go toward the cost of replacing their vehicles at currently inflated prices ), plus XXXX is taking advantage of the current chip shortage and COVID-related supply chain issues to sell replacement vehicles at much higher than usual prices. This is a double win for XXXX, but a total loss for New Jersey consumers like me who will be forced to take legal action against XXXX XXXX simply to recover overpayments XXXX has inappropriately claimed in the hopes consumers will not be able to protect their rights adequately.

Company response to consumer: Closed with explanation