CAR LEASE CONTRACTS EXPLAINED
Knowledge is power
Knowing the common elements of a car lease contract is integral to not getting ripped off, but understanding that the nitty gritty details will vary from dealer to dealer is equally as important. Some will inevitably be clearer than others, but looking out for the common factors is what separates an educated consumer from a consumer that dealers love to sniff out on their lot.
You could even pick up an empty leasing contract from the dealership you’re at before leasing, just to give yourself ample time to get familiar with what you’re putting your signature on.
Here are some of the common trends you’ll see across most lease agreements:
Under the federal government, dealerships are required to disclose specific things to the leasee about the transaction they’re partaking in. This should just be a written statement of all the things you have already discussed with your dealer – make sure you go over this to double check that the numbers match what you discussed with your dealer and that everything seems in place – it wouldn’t be the first time dealers switched around numbers last minute. Here are all the things typically disclosed in the disclosure statement:
- Amount due on signing (which is separate from your downpayment. This number includes DMV fees, bank fees, sales tax, and your first month’s payment)
- Your monthly payment
- All your payments totaled together
- The breakdown of your monthly payment
- Early termination costs/clauses
- A breakdown of wear and tear costs
Make sure there are also no mistakes in the contract – be aware that these contracts are written by dealers and people make mistakes (whether or not those mistakes are intentional is a different story).
Also, be aware that the whole “grace period” after signing a lease is complete bologna and a misconception – once the contract is signed it is in effect, so make sure you know what you’re signing.
All leases require full coverage insurance – leasing companies require this because you’re essentially borrowing their car for a couple years. They want to know 100% that if something happens to their car while it’s in your possession, someone will be taking care of it.
Wear and tear
When returning your lease, your car is not expected to have any more than the “normal” wear and tear damages inflicted on your car. Keep in mind, “normal” is a pretty vague, subjective term and every dealer will define it differently. You should be fine if you maintain your car and repair it reasonably.
If you inflict more damage on your car than you think you can get away with, definitely don’t wait until you return it to fix it at the dealership. They will 100% charge you way more than necessary. Instead, you should go to a third party body shop to take care of your damage, it’ll be a fraction of the price. Carvoy can recommend some good ones if you’d like.
Every lease comes with a limit to which you’re allowed to drive it, being that the more you drive it the less it’s worth at the end of your lease, and the less the leasing company can flip it for. Mileage on a contract is generally 10,000-12,000 miles per year, and about 10-30 cents per mile over that. While that doesn’t seem like a lot, no one is going to go 1 or 2 or even 10 miles over their limit. It’ll usually be at least a couple hundred to a couple thousand, which will definitely make your wallet significantly lighter. Here’s a link to more info on over-mileage if you’re interested.
Here is the point in the contract where the dealer spells out the terms of early termination and the penalties associated with it. Early termination is, quite simply, when a consumer wants to cancel their leasing contract early and has to pay extra fees because of it. These fees are extraordinarily high and we would definitely recommend avoiding them altogether by just sticking it out or getting your lease transferred to someone who wants to lease your car for a short amount of time, more specifically for the same amount of time that you have left on your lease. More on that here.
Additionally, some leasing companies won’t even permit early termination during the first few months or the last few months of your lease.
Interestingly enough, when your car gets totaled or stolen, it falls under the category of “early termination” – meaning you’re subject to some serious fees. Usually dealers will have GAP insurance as a requirement for your car lease, which essentially covers the gap between what your insurance company pays off and what you still owe. But dealers don’t always include this, so make sure you get it yourself if it’s covered in your contract.
Make sure you know exactly what you’re signing and that it aligns with your previous negotiations with your dealer.
Check out our exclusive lease deals here.