|Your Lease Obligations & Responsibilities
Leasing provides great flexibility; however, like a loan or a cash purchase, there are costs and expenses associated with operating, maintaining and repairing vehicles, items it is your responsibility to pay.
The lessor is obligated by law to provide you the following information, verbally and in the lease agreement, about your periodic payments:
- The total number of payments
- The total amount of the payments
- The amount of each payment
- The due dates for the payments
- The late-payment charge and how it is calculated
REPAIRS & MAINTENANCE
You will be responsible for repairs and maintenance when you lease, just like "normal wear and tear" and "reasonable maintenance" can easily be misunderstood, make sure your repairs and maintenance responsibilities are spelled out specifically in the contract and that you understand them before signing
All warranties must be disclosed to you. While the terms of these warranties vary greatly, you are required to follow the maintenance and repair schedules specified in order to keep the warranty coverage.
Extended Service Plans
Because warranties differ so much in their terms, the lessor may offer an extended service plan. These are normally described as "extensions" of existing warranties. If you are considering a short term lease, most major repairs will likely be covered under the manufacturer's warranty. Whether you choose a short term lease or a long term lease, you may want to consider the service benefits offered in these types of plans like emergency roadside assistance and rental car allowances. Simply be aware of all the provisions included in the plan you are considering before signing.
VEHICLE REGISTRATION & USE
While leases may include restrictions on moving the vehicle out-of-state, they do not normally include limitations on permitting other family members to drive the car. However, you are responsible for any applicable renewal registration fees or property tax obligations required by your state, whether you choose to lease or own the vehicle.
Aside from initial and continuing monthly lease costs, there are final costs associated with leasing you should be aware of. These include charges for excess mileage, excessive wear and tear, a vehicle resale charge and an end-of-lease payment. Let's take them one at a time.
CHARGES FOR ADDITIONAL MILEAGE
Most closed-end leases stipulate a set number of annual miles you may drive. If you exceed this allocation, you will be charged for every mile over the predetermined annual limit.
Negotiate a mileage allowance that fits your driving habits before signing a lease. You may be permitted to "purchase" additional miles up front at a lower rate.
If you default on your lease obligations of fail to make your payments, the lessor may repossess the vehicle and/or assess the costs or penalties stated in the lease. These may include forfeiture of your security deposit, immediate payment of all remaining obligations and the cost of legal fees to reclaim the vehicle.
EXCESSIVE WEAR & TEAR
All leases contain stipulations making you responsible for "excessive" wear and tear greater than "reasonable." To avoid any misunderstandings, be sure that specific definitions of "excessive" wear and tear and "reasonable" are included in your lease agreement.
VEHICLE RESALE CHARGES
You may be charged for preparing a vehicle for resale after you have turned it in at the end of the lease. Such charges normally cover cleaning, tune-ups and detailing. Be aware of this charge and what items are included when you sign the lease. Some leases call these charges disposition or disposal fees.`
This is a charge for adjusting the depreciation expense only in open-end leases. It covers the difference between what your lease states should be the value of your vehicle at the end of your lease (also known as its "estimated residual value"), and what its actual net resale value, or its appraised value, is. In open-end leases, the lessor will either sell or appraise the vehicle when you return it and compare the net sale proceeds with the value stated in your lease. You will pay any difference between the book residual value and the net proceeds of the sale.