Vehicle leases are long-term rental agreements where the user does not take actual ownership of the vehicle. Lease contracts usually go into great detail as to what will happen in case of default and what events constitute a default. In general, failure to make lease payments gives the leasing company the right to repossess your vehicle.
Definition
A car lease is essentially a rental agreement that allows you to use the vehicle during the term of the lease. Just as you have full access to your rented home and can refuse to allow anyone to enter the property, unless there is just cause, you will have full and unrestricted access to a leased vehicle. Similar to an apartment, you are obliged to keep the leased vehicle in reasonably good condition and cannot make permanent changes, such as repainting it or modifying the engine. You are also obligated to return the vehicle to the location specified in the contract at the end of the lease term.
Default
The definition of default is always clearly spelled out in the lease contract. The leasing company can be a subsidiary of the automaker or an unrelated corporation such as a bank. Usually, missing payments by a day or even a week does not constitute a default. There is often a grace period following the due date, during which you can make payments and still be considered in compliance with the contract. The financing company may still chose to charge you a late fee, even if you make payments within the grace period. However, you will likely avoid repossession of the vehicle.
Repossession
Once you are in default, the creditor will usually contact a repossession agent and ask him to repossess the vehicle. This agent can simply place your locked car onto a flatbed truck and drive away with it, without your permission, and with your personal belongings inside the vehicle. Whether the agent can enter the vehicle, and which areas thereof, depends on the laws of your state. Your personal items will be returned to you later. The removal of your vehicle in this manner is fully legal. Calling the police will not help, unless the agent is acting irresponsibly or harming you or your property in the process.
Sale
The next step is the sale of the car. This is often done in an auction at which the creditor collects the proceeds. The difference between the amount owing on the lease and the sale price at the auction, minus repossession fees and expenses, will determine how much you may owe to the creditor. You may then be sued for the difference.
Precaution
If you cannot make the lease payments on the vehicle, contact the creditor and explain. Even if the company is not willing to work with you by providing additional time to pay, or allowing you to downgrade to a cheaper vehicle, you can at least drop off the vehicle as opposed to forcing the creditor to repossess it. This way, you will not be held responsible for the repossession fees and expenses.
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