Car Leasing Laws
Leasing a car has been viewed by some people as a better alternative to buying a car. Car leasing proposes cost benefits to consumers such as lower down payment, monthly rent and total cost incurred in the first few years, making it more attractive than purchasing the car. With this increased interest in car leasing, car lease laws have been put into place to protect the consumers against fraud and wrong understanding of car lease agreements.
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Significance of Car Leasing Laws
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Complicated car lease agreements tend to be an avenue for fraud. During the last decade, a significant number of fraud incidences related to car leasing have been recorded. Undercover activities reveal that, in some instances, dealers provide consumers with a higher car acquisition cost, quote an interest rate lower than fair value or come up with means to overcharge the consumer. With car leasing laws put into place, consumers are given a form of protection against fraud and overcharging.
The Consumer Leasing Act
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The primary form of legislation governing car leases is the Consumer Leasing Act (CLA). This act, which was passed in 1976 by Congress, requires accurate and full disclosure of lease terms and conditions to the consumer prior to entry to the agreement so that consumers can comprehensively compare car leases and come up with more informed decisions. This act covers car leases with lease duration of at least four months but not exceeding $25,000 if used for personal reasons.
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What the CLA Requires
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The CLA requires that dealers provide the consumers with important details regarding a certain car lease prior to the signing of contracts. Lease contracts should include the lease period, amount due at contract signing, total amount to be billed to the consumer, monthly payments and how these monthly payments were calculated, other charges and wear and tear explanation. Furthermore, the consumer must be made fully aware of the conditions, penalties and fees associated with early termination of the lease agreement.
State Laws
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In some states such as California, Florida, Illinois, Hawaii and Washington, state laws related to car leases have also been put into place on top of the CLA to provide consumers with additional protection against fraud. These state laws require dealers to provide consumers with information on warnings, warranties and other important notices. In cases where these state laws are not consistent with the CLA, though, the CLA shall supersede these state laws.
Consumer Responsibility
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Though the CLA and other state laws help consumers to be fully aware of car lease contracts they enter into, the laws still do not guarantee a full protection against fraud. Some pieces of information such as interest rates or money factors are not required by law to be shown on contracts; thus, it is still up to consumers to make sure all the details they need are provided by the dealer and that they fully understand the car lease agreement prior to signing.
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- Photo Credit Image by Flickr.com, courtesy of Rick Flores
