• Last Updated:
  • Dec 15th, 2018 7:41 pm
[OP]
Newbie
Dec 10, 2018
5 posts

Demo lease contract

Hello,

Sorry for this new thread as I was not able to find a similar topic in the history.

I recently leased a demo car that already has 8000km.

On the signed contact, it stipulates that the pre-delivery mileage is 8000km and the mileage at the end of the lease should be less than 47 000km.

After having taken possession for 3 weeks, the dealership contacted me saying they made a mistake on the contract. They want to change the pre-delivery mileage from 8000km to 0km and the rest will remain the same. As per the dealership, the change is for accounting reasons.

I do not understand why the dealership is requesting this change. As I do not see any problem with the existing signed contract. The pre-delivery mileage is indeed 8000km and not 0km.

Any help or explanation would be greatly appreciated. Thank you!
20 replies
Deal Addict
May 30, 2012
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Well. How much was the lease?
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Jul 5, 2011
1547 posts
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Toronto
I can tell you exactly what happened and why you don't need to do anything.

The Sales Manager didn't account for the KM charges in the deal, and pushed it through expecting $x profit. When the deal went in for booking, the manufacturer will be looking for anywhere from $0.05 - $0.20 / KM in LEV adjustments. This means they have to pay upwards of $1600 for those KM that they likely didn't charge you for. He likely listed the KM on the bill of lease, but didn't adjust the LEV on the contract (which would have increased your payment).

At this point you've already signed the deal and you're driving in the vehicle. In Ontario a contract is a contract under all but a few scenarios. They would never be able to push through OMVIC to make you pay.

What you should do (because they have to do it anyway):

Return to the dealer and sign a new contract if they wish with the following factors:

1. Exisiting KM is listed on the bill of lease
2. Payment remains the same
3. Residual / LEV is adjusted DOWN to reflect the KM
4. You ensure that you get your KM allowance PLUS the existing KM. Eg; 60000 km lease + 8000 km = 68000 KM

Reality is that your vehicle will have more KM at the end of the lease and be worth less as well. The dealer has to correct that LEV - if you end up doing nothing and this goes away, check the LEV later and I guarantee you it will go down by whatever the up front cost of KM × existing KMs on the vehicle.

Whatever you do, don't agree to sign a new contract with 0 KM on the vehicle as it is a) illegal to sell a demo in Ontario without listing the correct mileage and b) problematic for you in the future with respect to your lease km allowance.

Lastly, because you bought a demo you should have had freight and PDI waived in addition to whatever else you negotiated. If you look at your contract and notice there is a freight charge, you will be able to legally force them to remove it simply by contacting OMVIC and sending your bill of lease. I mention this because if the dealer was sloppy enough to make the first 2 mistakes, they could have flubbed this one as well.

Good luck OP!
2013 Wins - $1320 - Woohoo!
[OP]
Newbie
Dec 10, 2018
5 posts
Its about 550 per month, price was adjusted as it was demo.
[OP]
Newbie
Dec 10, 2018
5 posts
Thank you very much for your explaination.

When I signed the lease, it was agreed and the contract stipulates that the final odometer reading should be less than 47000 km, which equates to about 10 000km allowed per year. (14,000km per year (allowed by the manufacturer by default) divided by 12 months then times the lease term of 40 months then minus the predelivery mileage of 8000km then divided the lease term of 40 month then times 12 months).

So the pre delivery mileage and the final KM at the lease end are both correct on the signed contract.

Given that everything seems to be correct, can I just keep the exisiting signed contract without any other actions.

Thank you
Last edited by Jeff9900 on Dec 13th, 2018 12:18 am, edited 2 times in total.
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Jul 5, 2011
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Jeff9900 wrote: Thank you very much for your explaination.

When I signed the lease, it was agreed and the contract stipulates that the final odometer reading should be less than 47000 km, which equates to about 10 000km allowed per year. (14,000km per year (allowed by lexus by default) divided by 12 months then times the lease term of 40 months then minus the predelivery mileage of 8000km then divided the lease term of 40 month then times 12 months).

So the pre delivery mileage and the final KM at the lease end are both correct on the signed contract.

Given that everything seems to be correct, can I just keep the exisiting signed contract without any other actions.

Thank you
If it is to be correct (and I say 'if' because not everything is done correctly even with the best intentions in the auto industry), you should have whatever the KM of the term is PLUS the existing mileage.

For example;

You sign a 40 month lease with a total of 48000 KM or 14400 KM per year. If you're buying a demo with 8000 km, your total allowance should be 56000 KM and not 48000 KM.

If the dealer didn't adjust the allowance up to reflect the existing KM, then they've made a mistake. To me it sounds like the dealer tried to make a nice looking deal for you without realizing what he/she was doing. You might think it's the Sales Manager - some paragon of automotive information and technique - but there are a lot of new / fresh / sloppy / lazy Sales Managers out there.

You can just ignore their calls if you want ... Technically you don't have to do anything. They won't get paid until they sign off on paying for the LEV adjustment. For your Lexus it should be somewhere around $1500... I imagine the manager told his business manager or sales rep to get the money. If they can t get it, he/she might try. Eventually they will give up and pay the LEV difference to Toyota Credit so they get the money for the deal.

If you really wanted to push the issue, you could go in there and get your extra KM / correct the LEV / keep your existing payment without too much issue. Up to you how much trouble you want to go through though because this would take some ladder climbing and fighting on your part. An email to the GM along the lines of " I bought a demo with 8000 KM and asked for 14400 KM per year on my lease - why am I being told I am only getting 11000 KM per year and I am supposed to come back to pay for some mistake that was made by your office? I am deeply concerned about my lease and I feel like I am missing a significant amount of KM in my lease... What will happen if I use that mileage? Will I have to pay for something I thought I already had?

Please call me @ 999-999-9999

Thank you

Random RFDER"

A GM / GSM is not going to like to hear that their staff is trying to push a demo through for booking with 0 KM. I'm sure they would like to fix your contract to be correct, even if it costs them some money.
2013 Wins - $1320 - Woohoo!
[OP]
Newbie
Dec 10, 2018
5 posts
Thank you so much for your detailed explanation.

I think i understood now. Basically, the contract stipulates that the allowed KM is 14000km per year, however the predelivery mileage was already 8000km, therefore the real drivable kilometer per year is 10000km per year.
However, if i understand correctly they should keep the pre delivery at 8000km and increase the final mileage to (14000/12*40+8000)=55000km. As a result, if they want to readjust the contract they will need to increase the annual KM allowed and reduce the residual value. If not, there is no reason to change the contract, as it reflects the reality already.

Thank you again for your help, i have learn so many new thing.
Deal Fanatic
Sep 1, 2004
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Jeff9900 wrote: Its about 550 per month, price was adjusted as it was demo.
If price is already adjusted and you are only hold up to return odometer reading, nothing you have to worry about.

End of the day, as long as you understand that purchased only 39,000km over 40 months and not 47,000km. That's fine.

This work out to be around 12,000km/year lease, unless I'm reading something wrong. And the monthly payment should be 17% less than a new car lease for it to be worthwhile.
Last edited by Xtrema on Dec 12th, 2018 6:16 pm, edited 1 time in total.
Deal Addict
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Jul 5, 2011
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Toronto
Jeff9900 wrote: Thank you so much for your detailed explanation.

I think i understood now. Basically, the contract stipulates that the allowed KM is 14000km per year, however the predelivery mileage was already 8000km, therefore the real drivable kilometer per year is 10000km per year.
However, if i understand correctly they should keep the pre delivery at 8000km and increase the final mileage to (14000/12*40+8000)=55000km. As a result, if they want to readjust the contract they will need to increase the annual KM allowed and reduce the residual value. If not, there is no reason to change the contract, as it reflects the reality already.

Thank you again for your help, i have learn so many new thing.
Yes and as well your payment should remain the same.
2013 Wins - $1320 - Woohoo!
[OP]
Newbie
Dec 10, 2018
5 posts
Thank you both very much for your help.

If possible, I just have one more question, but its more just for my knowledge.

Althought the pre-delivery mileage on the contract is 8000km, it stipulates that the final odometer reading needs to be less than 47 000km, which equates to the total KM for the term (14000km per year divides 12 months times the lease term of 40 months). Therefore, the contract/KM for the term has indirectly absorbed the pre-delivery mileage of 8000km, as the vehicle will only be drive for 10 000km per year vs the lease term km of 14 000km.
Considering the above, why would the manufacturer adjust the LEV and charges the dealership for the 8000km? As the total KM at the end will be within the KM for the term.

Thank you again!
Deal Addict
User avatar
Jul 5, 2011
1547 posts
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Toronto
Jeff9900 wrote: Thank you both very much for your help.

If possible, I just have one more question, but its more just for my knowledge.

Althought the pre-delivery mileage on the contract is 8000km, it stipulates that the final odometer reading needs to be less than 47 000km, which equates to the total KM for the term (14000km per year divides 12 months times the lease term of 40 months). Therefore, the contract/KM for the term has indirectly absorbed the pre-delivery mileage of 8000km, as the vehicle will only be drive for 10 000km per year vs the lease term km of 14 000km.
Considering the above, why would the manufacturer adjust the LEV and charges the dealership for the 8000km? As the total KM at the end will be within the KM for the term.

Thank you again!
Because the leasing contract needs to have the correct mileage on it - there is a line that specifically states the existing mileage at lease inception. Typically it would be anywhere from 3-100 KM and your allowance would be 48027 km for example. Why does it matter right?

If you write off the vehicle or it's stolen, you're completely covered by GAP protection EXCEPT in the case that you are deemed to be over your mileage for the duration you've been in the lease. For example; 2 years into your 4 year lease with a 40000 km allowance your vehicle is stolen. You have 22000 km on the clock. This would be considered normal and you would have no penalty. Supposed to say your demo Lexus is written off next week and it's got 8430 KM only 1 week into the lease period? You will pay for that mileage I guarantee it. Is it likely to happen? No - but it could. Also, would you pay it? Would the dealer or Lexus?

Secondly, your bill of lease is legally incorrect and grounds for an OMVIC forced unwind if you so choose. "I bought this Lexus and they told me it had only 20 KM as shown on my contract, but I've just checked the odometer for the first time and it has over 8000 KM. What do I do??"

Lastly, and I guess the most simple answer is because that's how Toyota Credit wants it done. Existing mileage + term allowance = what the vehicle should be returned with. LEV needs to be adjusted down accordingly to reflect the mileage. They obviously got caught trying to slide it through and now they're stuck because Toyota knows about it.
2013 Wins - $1320 - Woohoo!
Deal Fanatic
Jun 11, 2005
8516 posts
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Mississauga
xjesterxx wrote: I can tell you exactly what happened and why you don't need to do anything.

The Sales Manager didn't account for the KM charges in the deal, and pushed it through expecting $x profit. When the deal went in for booking, the manufacturer will be looking for anywhere from $0.05 - $0.20 / KM in LEV adjustments. This means they have to pay upwards of $1600 for those KM that they likely didn't charge you for. He likely listed the KM on the bill of lease, but didn't adjust the LEV on the contract (which would have increased your payment).

At this point you've already signed the deal and you're driving in the vehicle. In Ontario a contract is a contract under all but a few scenarios. They would never be able to push through OMVIC to make you pay.

What you should do (because they have to do it anyway):

Return to the dealer and sign a new contract if they wish with the following factors:

1. Exisiting KM is listed on the bill of lease
2. Payment remains the same
3. Residual / LEV is adjusted DOWN to reflect the KM
4. You ensure that you get your KM allowance PLUS the existing KM. Eg; 60000 km lease + 8000 km = 68000 KM

Reality is that your vehicle will have more KM at the end of the lease and be worth less as well. The dealer has to correct that LEV - if you end up doing nothing and this goes away, check the LEV later and I guarantee you it will go down by whatever the up front cost of KM × existing KMs on the vehicle.

Whatever you do, don't agree to sign a new contract with 0 KM on the vehicle as it is a) illegal to sell a demo in Ontario without listing the correct mileage and b) problematic for you in the future with respect to your lease km allowance.

Lastly, because you bought a demo you should have had freight and PDI waived in addition to whatever else you negotiated. If you look at your contract and notice there is a freight charge, you will be able to legally force them to remove it simply by contacting OMVIC and sending your bill of lease. I mention this because if the dealer was sloppy enough to make the first 2 mistakes, they could have flubbed this one as well.

Good luck OP!
Great advice but a demo has to get to the dealership just like a new vehicle so the freight needs to be included.
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antigua1999 wrote: Great advice but a demo has to get to the dealership just like a new vehicle so the freight needs to be included.
While the vehicle definitely does need to get to the dealership, per OMVIC in Ontario, freight cannot be charged to the customer for a demo vehicle.
Bills of Sale
While demonstrators are legally considered used vehicles, OMVIC recognizes most manufacturers qualify demos for new vehicle incentives and/or financing and that this may require the use of a new vehicle purchase contract. However, when selling a demonstrator, dealers should remove charges for freight, PDI, air tax, tire stewardship, etc. from the contract.
https://www.omvic.on.ca/portal/NewsPubl ... fault.aspx

The only exception being when the dealer uses a system where the freight cannot be removed (which I don't believe is possible any longer):
If a dealer uses software that will not allow new vehicle charges to be removed when selling a demo, the dealer should include a discount on the bill of sale, equal to the new vehicle charges, and separate from any other discount offered to the customer. This allows the dealer to demonstrate he/she is not charging freight, PDI, air tax, tire stewardship fee, etc., on a used vehicle.
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Deal Fanatic
Jun 11, 2005
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xjesterxx wrote: While the vehicle definitely does need to get to the dealership, per OMVIC in Ontario, freight cannot be charged to the customer for a demo vehicle.



https://www.omvic.on.ca/portal/NewsPubl ... fault.aspx

The only exception being when the dealer uses a system where the freight cannot be removed (which I don't believe is possible any longer):
Just like ever other car deal the customer always pays freight. The dealer pays when they receive the vehicle and when they sell it they recoup that money. They aren't in the business to lose money.

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