Automobile (Leasing)

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Civil Code Sections 2985.7 - 2991

Both federal and state laws govern consumer leases of motor vehicles where duration exceeds four months. Before signing a lease, consider the pros and cons of such an agreement and understand the contract terms as fully as possible. If you terminate early, you may pay a penalty. Don't sign unless you understand all of the lease terms. There is no "cooling off" period on lease agreements. If fraudulent business practices are being used, the California Department of Motor Vehicles (DMV), the New Motor Vehicle Board, or the local district attorneys office may have jurisdiction over the matter.

Consumers should be aware that:

1. There is no "cooling off" period for automobile sales or leases. You cannot change your mind after you sign the agreement.

2. Negotiate the price of the vehicle (called "capitalized cost") just as in a purchase situation. The capitalized cost of the vehicle is one of the factors that affects the monthly lease payment.

3. Consider selling a "trade-in" to a private party rather than trading it as part of the lease transaction; the dealer may not offer as much as the trade-in is worth.

4. Compare the proposed lease terms with purchase terms. If you have to pay a large capitalized cost reduction (similar to a down payment) and the monthly payments are nearly as large as they would be under a loan for purchase, you will have lost the main advantage of leasing.

5. Understand the early termination penalties, as well as contract terms of the condition of the vehicle at the end of the lease, charges for mileage above the contracted number, and restrictions.

Department of Justice
1300 I Street
PO BOX 944255
Sacramento, CA 95814
(800) 952-5225 (CA Callers)
(916) 322-3360 (Out of State)
(916) 323-5341 (fax)
(800) 952-5548 (TDD in CA)
(916) 324-5564 (TDD Out of State)

'New Motor Vehicle Board
1507 21st Street, Suite 330
Sacramento, CA 95814
(916) 445-1888
(916) 323-1632 (fax)
(916) 323-1631 (fax)

Department Publications: California Lemon Law and Consumer Resource Handbook

Other Publications: None

Other References: None

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