5. EARLY AUTO LEASE TERMINATION AND AUTO LEASE INSURANCE GAP LIABLITY WARNINGS

EARLY AUTO LEASE TERMINATION can be so expensive (since a vehicle's ACTUAL depreciation is greater the AUTO LEASE depreciation) that California/Regulation M requires auto lease contracts to included a specific warning about it. Click on the top red portion of the auto lease contract or here to see the required EARLY AUTO LEASE TERMINATION notice.

California requires that all auto leases proportion the rent and depreciation charges of each auto lease PAYMENT by the CONSTANT YIELD method and specifically forbids the using the Rule of '78's. California sets the maximum liablitly for EARLY AUTO LEASE TERMINATION at the SUM of:

1. PAYMENTS past due
2. OTHER CHARGES past due (except excess wear/mileage)
3. DISPOSITION FEE (must be listed the lease)
4. RECONDITIONING, REPOSSESSION, STORAGE fees (ONLY if repossessed and fees must be reasonable)
5. ADJUSTED CAPITALIZED COST - (ACCRUED DEPRECIATION + REALIZED VALUE)

Item #5 forms the rationale for the EARLY TERMINATION notice requirement because the (ACCRUED DEPRECIATION + REALIZED VALUE) is often several thousand dollars less than the ADJUSTED CAPITALIZED COST. Use our LEASE CALCULATOR to determine what your EARLY AUTO LEASE TERMINATION COSTS will be.

DETERMINING REALIZED VALUE IN AN AUTO LEASE- A lessee may, at their expense, pick a mutually agreeable party to conduct an appraisal or elect one of the following: If the lessor SELLS the vehicle the lessee may use the HIGHER of the sale price OR amount set by lessor or lease. If the lessor RETAINS the vehicle the lessee can use any "vehicle value guide" used by California Vehicle dealers (i.e. Kelly Blue Book).

AUTO LEASE INSURANCE GAP LIABILITY: A lessee's insurance may only cover the REALIZED value of a vehicle in the event of a total loss; an "involuntary" EARLY TERMINATION. Click on the lower red portion of the auto lease contract or here to see the required AUTO LEASE GAP LIABILITY NOTICE.