Chrysler accused of charging phantom sales tax on car leases

Chrysler Capital Corp. is wrapping a “phantom” sales tax into Car leases, according to one of its customers, when leases are extended to avoid higher prices in a tight market.

David Lobel of Rye Brook accused Chrysler and Santander Consumer USA, the Auto maker’s preferred provider of Car loans and leases, of deceptive business practices and unjust enrichment in a complaint filed Sept. 28 in Westchester Supreme Court.

The companies are “wrongfully, illegally or mistakenly receiving funds,” the complaint states, “to which defendants are not entitled.”

Chrysler and Santander did not respond to an email asking for their side of the story.

In 2018, Lobel, a co-owner of Lobel’s butcher shop on the Upper East Side, leased a new Jeep Grand Cherokee valued at $52,120 and costing another $1,949 in sales tax.

He paid $8,258 up front for the first month and then $540 a month for the remainder of the 3-year lease.

The sales tax must be paid in full when the Car is registered or when the first lease payment is due. Sometimes the customer pays the tax, according to the complaint, but usually the Car dealer loans the money to the customer, pays the tax and rolls the tax plus interest into the monthly lease payments.

When Lobel’s lease expired this past July, the cost of new and used cars had jumped dramatically. A shortage of computer chips had limited production of new cars, while low interest rates, a surging economy, and government stimulus payments had boosted demand and prices for all cars.

The Car shortage has led to a “dramatic surge” in lease extensions, according to the complaint, as customers face “the daunting prospect of replacing the vehicle in a Car market with extraordinary tight inventory and dramatically higher prices.”

Lobel extended the lease on his Jeep, and the monthly payment increased to $585, according to the complaint. That included more than $45 for the sales tax that had already been paid in full.

The lawsuit was filed as a class action seeking restitution on behalf of Lobel and every New Yorker who has extended a Car lease and was charged for sales tax that had already been collected and paid.

The complaint does not say how many customers have been overcharged or how much extra money Chrysler and Santander have allegedly collected.

Lobel is represented by Harrison attorneys James R. Denlea, Jeffrey I. Carton and Robert J. Berg.