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Car Lease Contracts

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Before you sign a car lease contract, you should know and understand the basic details included in all car leases, no matter how long the contract will last or how much you'll be paying.

Lease Length/Term

The lease length or lease term is the number of months you will be leasing the car. Make sure the lease term is correct and you understand when you will be required to turn in your vehicle.

Amount Due at Signing

The “amount due at signing" section will include the total dollar amount you owe the day you sign your lease, as well as a breakdown of each of the costs and fees. You should see an outline that shows how you will be paying the amount due, including the following:

  • Trade-in value (if applicable).
  • Dealer rebates.
  • Down payment.

Monthly Payment Breakdown

There will be a detailed section clarifying each of the factors that are calculated into your monthly payment. These include:

  • Capitalized cost reduction: This includes any rebate, net trade-in allowance, or other credit that will reduce the agreed-upon value of your vehicle.
  • Residual value: The value of your car at the end of your lease.
  • Depreciation: The amount you will be charged for the expected decline in value of your vehicle for normal use during the duration of your lease.
  • Rent charge: An amount charged in addition to the depreciation of your vehicle.
  • Sale tax: The amount you'll be paying each month in sales tax.

Mileage Charges

When negotiating your lease, you agree to drive a specified number of miles each year. Your lease contract will clarify how much you will be charged if you go over this limit.

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Purchase Option

The purchase option of your lease will clarify the dollar amount you can purchase your vehicle for at the end of your lease, including a purchase fee.

Fees & Taxes

This line item is specific to the license fees, registration, title, and taxes in your state for owning and operating a car. It's important to know that the number on your lease might be an estimate and may be higher or lower once your car has been licensed and registered with your state motor vehicle department.

Maintenance & Insurance

Because a lease is similar to a car rental, you'll be required to carry a specific limit of liability insurance. In addition, as the lessor you will be require to pay for maintenance and any repairs of the vehicle while in your care. All of this will be clearly outlined in your lease agreement.

Early Termination

If you need to get out of your lease for any reason, an early termination may be an option for you, but it may also be a costly one. Your lease agreement will clarify the fees associated with early lease termination, whether due to default or attempting to turn your vehicle in early.

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