Before leasing a car, consumer should understand the terms
Leasing a car is an important moment in your life. You want to make sure that you thoroughly understand the terms of your lease. Having favorable lease terms can save you money and prevent a conflict down the road.
A lease agreement is formed between a Lessor, the owner of the vehicle, and the Lessee, the individual (or company) authorized to use the car. When leasing a car, you’ll have to sign such an agreement.
Here are other terms that you should know:
The down payment is usually between 10% – 20% of the car’s total market value.
The lessor may or may not require a security deposit to cover future damages to the car. When you return the car, you will receive your security deposit back less any damages to the vehicle.
A dealer fee is usually assessed to clean and detail a used car. If it is a new car, then a dealer fee is often not charged.
A registration fee is used to register the vehicle with the Department of Motor Vehicles.
Guaranteed Auto Protection (GAP) coverage is to cover the difference between the assessed market value of the car and the balance owed on the car. If the car is stolen or totally destroyed, and the amount owed on the car is more than the car’s market value, then the registered owner is responsible for the difference. When a car is financed, registration fees, taxes, and warranties may be included in the financed amount; thus, the owner could owe more to the financing company than the car’s value. Additionally, the car’s value often deteriorates faster than the loan can be paid off. For example, when you buy a new car, the value of the car drops the second you drive it off the lot.
Initial Market Value
The amount the car is worth at the execution of the lease. You can negotiate this amount depending on the condition of the vehicle.
Projected Final Market Value
The amount the car is expected to be worth at the end of the lease.
For more information about an auto lease, check out this template. You will be able to gain in-depth knowledge about common lease terms and clauses.