4. THE TRUTH IN LEASING ACT - PT. 3
AUTO LEASE ISSUES THAT COME UP AT THE END OF AUTO LEASE TERM
1. EXCESS WEAR AND USE IN AUTO LEASES: Any consumer lease (i.e. furniture, etc.) can require the lessee to pay extra for goods having "excessive wear".
With auto leases this is objectively stated in terms of paying extra for miles driven over a stated mileage. Click on the top yellow portion
the contract image or here to view a typical
Auto Lease Excessive Wear and Use clause.
IMPORTANT: Have an accurate estimate of how many MILES you will put on the vehicle before you sign any auto lease. EXAMPLE: An auto lease is written for a $200.00/month payment
with an agreement to pay thirty cents ($00.30) a mile for every mile over 30,000 miles. At the end of the auto lease
the odometer reads 50,000 miles. The lessee owes another $6,000.00; nearly 2/3 of the total auto lease payments.
NOTICE: A lessor can still demand extra money if the vehicle is returned with "excessive" wear (seats worn out,
cigarette burns, paint scratches, etc.) regardless of the miles driven.
2. OPEN END AUTO LEASE: is an auto lease where the lessee pays any difference between the
actual (REALIZED) value and the stated auto lease RESIDUAL value in the event the REALIZED value is lower. REALIZED value is a fancy way of saying RESALE value.
EXAMPLE: the stated RESIDUAL value in an open-end auto
lease is $10,000.00. However the lessor could only sell the vehicle for $8,000; the REALIZED
value. The OPEN-END lessee would have to pay an extra $2,000.00.
CHARGES LIMITED TO TRIPLE MONTHLY PAYMENT: Before California and Regulation M limited the difference between the RESIDUAL and REALIZED values to
THREE TIMES (3X) the auto lease monthly payment dealers would often induce somebody into signing an auto lease with low depreciation and a small payment knowing
they could get a lot more money at the end of the lease. Click on the top yellow portion the contract image or here to view a typical
Auto Lease Open-End Lease Term.