Car Lease Agreement Restrictions

By design, car lease agreements are difficult to terminate and because of this lease companies enjoy a very loyal clientele. Because lease companies retain a stake in the leased vehicle, a number of restrictions are imposed on the lessee. Some of them include the following;

• Vehicle usage

The leased vehicle may not be used as part of a commercial fleet, taxi or livery as this kind of application might accelerate wear and tear and consequently result in a lower residual value at the end of the lease term. Vehicle application restrictions are normally clearly stated in the lease offer and agreement.

• Termination fee

Lease companies design the termination in such a way as to discourage early lease termination. The cost involved in terminating a lease agreement is always substantial and prohibitive. Because of this, many companies have sprung up specializing in buying out leases. It is possible to transfer your lease to another individual without incurring any penalties under the same terms. However, some lease companies may still hold you liable in the event the individual that took over your lease defaults.  

• Excess mileage fee

Lease companies limit on mileage per year to about 10,000 to 15,000 miles. If the you drive miles in excess of this, a charge of about 0.1c to 0.25c (US cents) per mile maybe charged. The rationale of this charge is simple; the higher the mileage, the more the wear and tear which impacts on the residual value of the vehicle at the end of the lease term. If you anticipate to ply more miles, it is prudent to negotiate extra mileage at a cheaper cost but care must be taken not to pay for mileage that you will not use. Nowadays, there are lease companies offering customized lease mileage where you can choose from anywhere between 1000 and 50,000miles per year, in increments of 1000. To get the best deal on mileage, do some research first and compare deal pricing.

• Excessive wear and tear fee

When you return a car at the end of the lease, the dealer asses it for mileage, body damage, tire wear and mechanical problems. If the cost of these repairs exceeds the allowed value as per your lease contract, you pay a penalty fee known as the excessive wear and tear.