Car Lease Agreement
Obtaining a lease on a car is a major financial investment and for this reason you need to be very attentive with the car lease agreement before signing the deal. We highly recommend that you get a blank lease contract from the car dealer before signing up a lease so that you can have enough time to examine it and find out all the ins and outs. You should know that the federal law in the United States requires that car lease contracts must contain certain sections in which specific figures and facts are disclosed to you. Some of the sections that you will find are:
a) The amount of money you will have to pay when signing the deal;
b) Information regarding the monthly installments;
c) Other fees and charges;
d) The total of payments;
e) The total of finance charges;
f) How the monthly payment is determined;
g) The early termination statement;
h) Wear & tear explanation.
Despite the fact that significant improvements have been made regarding these agreements, there are still plenty of issues to fix. Take for example the fact that the current law does not regulate the actual figures in these agreements, like the amount of money you are credited for the trade-in, the car’s price tag, and finance fees.
You have to understand that these car lease contracts are written by the dealers and you’d be surprised to find out how many mistakes they have, some legitimate while others intended and the bad thing is that at the moment there is no low that can punish these errors. Needless to say, you have to detect these discrepancies before signing the deal because after that, it will be virtually impossible to change anything. It is a common misconception among people that there is a three-day “right to cancel” law regarding automobile leases or purchases. Well, there isn’t one so be careful when analyzing the car lease agreement.
Nowadays, most of these auto lease agreements require that you maintain an insurance coverage: bodily injury / death liability is $100,000 / person, $300,000 / occurrence; property damage liability: $50,000, comprehensive and collision for the actual value with no more than $500 deductible. We know that most of you think that this is more than you would buy if you were given the opportunity, but you should know that it is always a smart choice to have maximum protection as we know how expensive car repairs are, not to mention how pricey lawsuits have become.
Another thing that you will find in just about every vehicle lease agreement is the one regarding the regular wear & tear. You will find within the contract that the car must be returned with no more than the “normal” wear and tear. However, not all agreements specify exactly what “normal” means. You’d be surprised to find out that this is one of the most important reasons why people decide not to sign a car lease, especially first-time leasers. They are afraid that after the lease is over and they have to return the car, the company will charge thousands of dollars as penalties for minor scratches and dings. You should know that this is not true, most of the times. They will allow these small scratches & dings because it is a normal thing when driving a car, especially in city traffic, but also on the highway. However, if the car suffers from serious scratches or the tires are worn out, it would be wise to fix these issues before returning the car. Otherwise, you’ll pay a lot in penalties.
Speaking of penalties, a typical car lease agreement mentions excessive mileage penalty. In other words, if you drive the car beyond the mileage limit mentioned in the contract, the company will charge you more money. In most cases, this limit is 15,000 miles / year, but there are lots of contracts where you are allowed to drive only 10,000 or 12,000 miles annually. For these reasons, figure out how much you will be using the car so that you can select the limit that you want. If you go beyond that limit, expect to pay up to $0.30 / mile. If you know for sure that you will be driving more than 15,000 miles (or whatever is mentioned in the contract), we recommend that you “purchase” extra miles so that you can avoid paying those nasty penalties.
You’ll also find in the contract something about early termination. These lease contracts mention the conditions in which you are allowed to terminate the agreement. However, keep in mind that most of the lease firms prohibit termination of the contract during the first few and last few months of the contract. We highly recommend that you avoid early termination as it can be very expensive.
Unless you have gap protection, if the car is stolen or destroyed, the company will consider this as an early termination of your contract. We know that this is totally unfair but there’s nothing you can do and you’ll be in the same situation as mentioned in the previous paragraph. This gap protection (aka gap waiver or gap insurance) will cover any additional amount of money that you might owe after your insurance company pays off. If the lease that you are about to sign does not come with this gap insurance, nor it is offered by the dealer, we highly recommend that you get in touch with the bank or the car insurance company.
As you can see, there are lots of issues to take into consideration when signing a car lease agreement. Never sign the contract if you don’t know what to expect from it. As we said at the beginning of the article, get a blank lease contract and analyze it thoroughly in order to find out all there is about this deal so that you won’t have any unpleasant surprises after signing the contract.
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