Lease Agreement Form

Shown below is an illustrative example of a car lease agreement form — a legal contract between the lessee (customer) and lessor (finance company). Every lease finance company has their own unique form and will almost certainly differ from the one shown below, although the major parts of the form are required by Federal consumer laws and will be on every form. It should be understood that car lease agreements are legal business documents and not necessarily meant to be easily understood.

It should be pointed out that a lease agreement is a contract with a lease finance company — usually a subsidiary company of the car manufacturer. Although the dealer arranges leases of his vehicles with customers, and signs the lease agreement form, he is not the one leasing the car to you. The lease is "assigned" to the lease company after the paperwork is completed. Your payments go to the lease finance company. If you later have issues with your lease, you contact the lease company, not the dealer.

This sample form has two purposes: one is to illustrate and describe the various parts of a auto lease form, and the second is to show you typical numbers on such a form — but with one caveat. There are errors on the form that you might possibly see on a real lease agreement put together by a dealer, either by mistake or intentional. Can you spot them?

Notice that on a typical dealer lease agrrement form, there are no calculations shown. Nowhere is it shown how numbers such as the monthly payment are actually calculated. If you want to check the accuracy of the numbers, you must calculate them yourself, using tools such as our Lease Calculator.

The sample form, with errors, is shown here, with a monthly payment of $346.42. Without errors, the payment should only be $231.26. Take a look, then we'll explain the errors down below.

Errors in the above car lease agreement form

The first error, in section #9, notice the term is 36 months and monthly mileage allowance is 10,000 per year, but the Total Mileage is only 30,000 miles, not 36,000 as it should be. This won't affect your payment amount but will come back to bite you in the end when you have to pay $0.20 per mile over 30,000 miles, when you thought you should have 6000 more miles to go.

The second error is the most significant. Notice that the section just to the right of section #16 states that the Depreciation is $11,602 and calculated as Cap Cost minus Residual. That's incorrect. It should be: Net Cap Cost minus Residual. But Net Capitalized Cost is not shown nor calculated. Net Capitalized Cost is Capitalized Cost minus Adjustments (box including sections #12 & #13) and minus Capitalized Cost Reductions (section #14). That means Net Cap Cost should be $21,630, and Net Cap Cost minus Residual should be $5,502. This error has a huge affect on the monthly payment.

Using these corrected numbers, with a money factor of .00165, the Monthly Payment should be only $231.26 (with tax), not $346.42. (Calculated with our Lease Calculator)

The third error is not so much an error as a potential misunderstanding. The amount due at signing (the box just below #19) is shown

as $3096.42, which is the down pament $2000, plus first month's payment $346.42 (incorrect per the above paragraph), plus manufacturer's Rebate $750. But wait. Isn't the Rebate included in the Capitalized Cost Reduction box? Yes it is. Rebates are like gifts from the car manufacturer and are granted to you as if you are paying them yourself, although you are not. That means, the actual cash amount you must pay at signing is only $3,096.42 minus $750 = $2,346.42.

The final error is one of misplacement of a fee. It's the Title/Registration Fee of $350 in the Adjustments box. This fee should actually be part of the Total Due at Signing amount.

Conclusion

Car dealers can, and do, make mistakes on car lease agreement forms. However, the forms are not designed to be easily understood. Some information and calculations may not be shown on the form. Agreement forms are not standard; they vary by lease finance company. It's the customer's responsibility to read, understand, and verify the information of the form before signing.