Car Dealership Lease Agreements: A Guide for Car Shoppers
When you decide to lease a car, one of the most important steps in the process is reviewing and understanding the lease agreement. A lease agreement is a legal contract between you and the car dealership that outlines the terms and conditions of the lease. In this article, we’ll cover the key elements of a car dealership lease agreement and what you should look out for.
Length of Lease
One of the first things you’ll see in a lease agreement is the length of the lease, also known as the lease term. This can vary from 24 to 60 months, but the average lease term is 36 to 48 months. Be sure to ask about early termination fees if you decide to end the lease early.
Monthly Payment
Your monthly payment is based on the car’s purchase price, residual value, and the money factor (similar to an interest rate). The residual value is the estimated value of the car at the end of the lease term. The money factor is a decimal figure that determines your interest rate on the lease. A lower money factor can lead to a lower monthly payment.
Mileage Limits
Most lease agreements come with mileage limits. This is the number of miles you can drive during the lease term without incurring extra fees. The standard mileage limit is 12,000 miles per year, but you can negotiate a different mileage limit. If you exceed the mileage limit, you’ll pay a per-mile fee at the end of the lease.
Wear and Tear
Lease agreements also include a wear and tear clause which outlines what is considered excessive wear and tear. You’ll be required to return the car in good condition, and any damage beyond normal wear and tear may result in additional fees.
End-of-Lease Options
At the end of the lease term, you’ll have several options. You can return the car and walk away, buy the car for a predetermined price, or lease a new car. Some dealerships may also offer the option to extend the lease.
Bottom Line
Before signing a car dealership lease agreement, be sure to read it thoroughly and understand all the terms and conditions. Remember to ask about any fees, including early termination fees and excess mileage fees. Understanding your lease agreement will help you make an informed decision when leasing a car.