Dima

You guys know what arbitration is? You appear before the arbiter who makes a decision, but you're allowed to have a lawyer who would advise you how to argue your case. It's like a judge. Stop confusing the guy.
And secondly, he can still go to courts to argue why this arbitration clause should not be enforced.
Furthermore, just because they have a right for security deposits, does not mean they are in the right in this case. The attorney could suggest how to get more money from insurance for example.

SW20S

You're the one confusing the guy. Who said he can't have an attorney at an arbitration? He can argue in court that the arbitration clause shouldn't be enforced but guess what he needs to have any shot at accomplishing that? An attorney. My argument is against those who say he does not need an attorney and can just sue MBFS in small claims court. He cannot. Remember he spoke to an attorney that sent him off, he did that because there's no worthwhile case.

Getting more money from the insurance company is the only avenue that will work, but that needs to be done before the final settlement is reached and it needs to be done by MBFS who has no reason to attempt to do so. If its already been reached, he is SOL.

I'm sure he can find an attorney who would be willing to take on all this foolishness of trying to circumvent the arbitration clause, but thats going to cost him another $20,000 in attorneys fees. You gotta know when to quit.

juanmor40

Legalese aside, the fact he got a check from the insurance company after MBFS was made whole tells MBFS already valued the car below what the insurance company was willing to accept. They could have valued it higher (within market value and reason) on behalf of the customer (though under no obligation to do so), and still get some money from the "security deposit", and they decided not to do so. What could we expect their position would be at this point?

Thank you all for the very instructive discussion. Learned quite a bit for the next interaction with dealers, and anyone guiding me to a fast conclusion.

Frenetic

OP, after reading the arbitration clause, you can still file a small claims court and it will be up to Mercedes if they choose to arbitrate it. Maybe they will, maybe they won’t. I have no idea.

In either case, whether it is in court or arbitration, I would use the same argument: the Gap Waiver and Security Deposit fulfill the same role for all intents and purposes, at least when it comes to a complete vehicle loss. Which one takes precedent and why doesn’t the gap waiver apply in this scenario where it would apply if there was no deposit at all?

Dima

good attorney can be had for $600 / hour. he can spend $5,000 and win $20,000. assuming it's 50/50, what would you do? In my crappy community college and my also-run investment firm, we'd take the deal.

guess2098

I would said no matter what you sign, you can still file lawsuit. my friend who work for one of biggest national insurance company. do you know in your home insurance agreement you gave out the right to lawsuit them. but there are hundreds of lawsuits they received everyday. most the time company just settle

SW20S

As I have said a dozen times, he can’t file in small
claims court. His alleged damages are too high. Small claims court is not an option.

MBFS will 100% arbitrate it.

You’re talking as if you will win the $20,000. You won’t, because the agreement says MBFS did nothing wrong.

You dramatically underestimate the hours required to do this, to argue the arbitration shouldn’t be enforced, the research, etc. $20k is 30hours.

Frenetic

Yeah, the $10k limit is an issue, unless he just claims that amount.

Maybe he should just go straight to arbitration since it is in either parties right.

Dima

No, it's your interpretation of the agreement and is your opinion that nothing can be done.
And that's not how a law firm works. The research is done by a paralegal who gets 50$ / hour, the argument is done by a less experienced lawyer, the main attorney just gives them direction and consults with client.
Most of them has seen those agreements before and can immediately judge the chances for success.

SW20S

If he’s going to press it that’s what he should do, but ultimately he’s going to lose.

SW20S

Its black and white my friend. Just read it. Totaling the vehicle is default, and they have the right to use the security deposit to remedy any costs of default. If you don’t think MBFS has written this language tightly, I don’t know what to tell you.

I understand how law firms work. Paralegals billed out at $50 an hour in 1995 maybe lol. What they earn and what the firm bills are different.

And as was said before, he talked to an attorney that sent him packing for the very reason you put in your last sentence.

Dima

Sure, the agreement is written so if he does put MSD they can take it, but if he doesn't, they're just out of luck.
perhaps the OP lives in the land of bad lawyers.

Frenetic

You never know until you try. If I were him, I would force the issue into arbitration. It would be worth it to me since there’s really nothing to lose other than time and a small filing fee.

I would play the damage waiver language and simply ask why it can’t be used here? Maybe it’s more obvious to others, but they clearly show two mechanisms to cover the losses with no subjective preference.

juanmor40

I would not say "they are just out of luck". They will come back to the OP for the difference even if the GAP did not make them whole. Somebody has to cover the difference, However, in such a scenario, it would be MBFS having the issue of whom they will be after, and not the OP. MBFS could swallow the difference, just a drop in the bucket.

SW20S

Or maybe your assessment of the situation isn't accurate. Thats more likely.

And yes, MSDs reduce their liability in the event of a default. Thats why they reduced the interest charged in exchange for him making them.

Gap insurance is like any other insurance, they only pay claims when they have to and the more claims a finance company has the more they pay in gap premiums. So, no MBFS doesnt want to file a gap claim if they dont have to. In the scenario where there are MSDs, the likelihood of having to file a gap claim decreases which is another reason why they reduce the interest charges in exchange for making MSDs.

What would be the point in them reducing interest in exchange for MSDs if there was no way they could ever get their hands on them?! Is that logical? They reduce the interest because the MSDs limit their exposure to loss. Thats logical.

You have a lot more free time and energy than I do then

Frenetic

Yeah, I’m very principled and $18k is a lot of money. Heck, I’ll drive back and complain to McDonalds if they left out an item and I sure as heck will complain if I feel like MBFS is stiffing me out of $18k.

Dima

No they reduce the interest rate because the money they make on his deposit is more than what they lose on loan reduction. They also have extra cash they can show on a balance sheet.
Who in the right mind would risk so much money to save an extra $1000 over the lease amount? isn't the point of lease is a risk reduction on cases like that?

juanmor40

Finally, someone said it. I am not a financial genius by any means, but I can make more than that with $20K over 3 years.

In fact, the advice I always get is NOT to put much down payment if I have it. Borrow as much as you can as long as the rate is lower than your time-averaged expected (not dreamed) gains. It has worked for me this far.

SW20S

Who in their right mind would risk that money? Exactly. Nobody should. That’s why you never put money down on a lease.

What you mention is a reason why they do that, but risk reduction is the primary reason. You are seeing that risk reduction in play here.

Frenetic

I agree it’s not smart to put that much money down, but no one believes or thinks they will be totaling their new car so soon after purchase. I’m sure the odds are low, so any risk is automatically filed away. I think he also said the dealer mentioned he’ll get it back no matter what, but I would have to read all of his posts again. That’s another angle he can play at arbitration, although I’m sure the dealer will deny or say they can’t remember.

But, we don’t know the details of the lease and how much he saved from a reduced money factor. Maybe it knocked $100 off per month. That’s $1,200 per year, which is like collecting almost 7% APY on that money.

SW20S

Its just not worth the risk...invest it somewhere else to get a 7% return. The sales manager said he would get it back, but they will say anything to get you to buy the car.

Frenetic

I know, but you guys are harping on him like he made some gigantic blunder. Look at it from his perspective at the time of the lease: no one actively believes they’ll total their new car within a few months of ownership. I don’t. And maybe the savings was more, $200 a month with that large of a security deposit (i have no idea what it was). That’s a decent return, over 10%.

Hindsight is 20/20 and it’s easy for us to criticize his decisions now, but the simple fact of the matter is that it’s too late and there’s no point rubbing salt in the wound. Like I said before, he just needs to fight this.

SW20S

He made a gigantic blunder, but its a blunder lots of people make. People think MSDs are safe but they aren't, the lease agreement spells out in black and white that they can be taken in the event of a default (such as totalling the car). MANY MANY people tell you that MSDs are safe in this scenario, but they are wrong.

He can try and fight it but again he can't win because the lease agreement he signed says they can do exactly what they did. You can't just decide after you have signed an agreement that you don't want to live up to what you agreed to. Its not anybody else's responsibility to make sure he understands what he signs but him.

We're not trying to rub salt in his wound, just trying to impress upon others not to make the same mistake. Continuing to tell him that he has an avenue to fight this when we have demonstrated repeatedly that the lease says the finance company can do this doesn't make any sense and doesn't help him.

Honestly, if I were him I would call the news before I filed any suits or went to any arbitration. This is legal but its still wrong and is misunderstood greatly by consumers and consumers would benefit from this story being shared. The positive of that is it might just shame MBFS into making him whole too

Chris2023

I am from Southern California. Based on the information I got from Orange County Small Claims Court, lawyers are not allowed.

It will cost $30-75 for filing which I can even apply for waive. Already lost $20,500 and does not matter to lose $100-200 more.

As I posted in my previous message, I will sue both MBFS and the dealership that I rent my EQS in Orange County Small Claims Court. I will sue $10,000 for each of them. On the lease agreement, MBFS did not specify possessing during default MSD deposit before Gap Waive kick-in. The dealership I leased the EQS did not tell the potential loss of my MSD deposit when I signed on the MBFS agreement. Actually, the financial manager did not even know that risk at all!

Chris2023

@Frenetic Will do. Without trying how can I know the result, right?