*1 Robert C. Forman’s (“Forman”) and Katelyn Townsend’s (“Townsend”) cars collided. The accident was all Townsend’s fault — there is no question about that, she admits it. Because of Townsend’s negligence, Forman’s car, a leased Subaru Impreza, was totaled. Townsend paid Subaru for this loss. In turn, Subaru released Forman from the lease. Forman says that making Subaru whole, is not enough; he too suffered.He says that Townsend’s negligence caused him to suffer the loss of his transactional costs to lease the car — $1,566.90. Townsend refused to compensate him. Forman then commenced this action. Compensation for transactional cost involving the purchase (or lease) of a car raises a novel issue. Neither party provided authority on this issue and the court’s research failed to identify a case that decides this point of law.At trial, the evidence established the following facts. Forman leased a Subaru Impreza. The value of the car, new, was $22,460.70. It was anticipated that the lease would run three years. At the end of the lease the car would have a residual value of $13,869.13. Forman agreed to pay monthly installments of $255 for 36 months or $9,180 (which represented the difference between the value of the car new and its value at the end of the lease plus a “rent charge” of $588.00). In addition, Forman paid his first monthly payment of $255 together with transactional costs of $1,566.90 at the lease’s signing. Here are how the transactional costs break down: $162.50 (New York registration, inspection and tire waste fees); $670 (dealership fees); and $734.40 in sales tax.1 He leased the car at the end of December 2016 and the accident occurred in June 2017.To begin with, Townsend does not dispute that Forman is entitled to receive the full benefit of the bargain he made with Subaru. Including the initial payment at the signing of the lease, Forman made six payments which totaled $1,530. The extremely detailed market valuation report (exhibit A) indicates that the Subaru lost $1,615 of value due to mileage. Thus, Townsend argues that Forman got what he paid for.However, implicit in this argument is that Forman is not entitled to transactional costs because the market value of cars does not reflect the transaction cost incurred by the purchaser. Transactional costs are considered sunk cost. Basic microeconomic theory holds that only prospective costs are relevant to an investment decision. In other words, the value of a car does not increase because the original purchaser had paid a high transaction cost to acquire the vehicle. Conversely, the value of a car does not diminish because the original
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