Agreeing to a car lease is a major financial commitment. You're bound by the provisions of the lease contract, including early-termination penalties and mileage overages. Some leases come with the option to assume ownership. In California, there are rules and protections for customers of car leases.
Advantages of a Lease
A lease is a long-term car rental. Leases are an option for consumers who can't afford or choose not to purchase a new car. Leases have some advantages over purchases. Lessees have lower upfront costs and monthly payments than car buyers and are not required to make a down payment. Additionally, some may choose to lease for intangible reasons. As an example, "some people like to have a new car every two to three years, or may prefer to always drive a car that is under factory warranty," according to the Marin County District Attorney's Office.
Drawbacks of a Lease
Even though leasing is a good option for some, it also has drawbacks. The overall cost to the consumer of leasing a car is usually higher than buying one. Ending the lease early can result in costly termination fees, and the contract language that explains these fees is usually complicated, according to Marin County. Lessees don't have equity in the vehicle and cannot sell it. Finally, most leases require customers to stay below a specified mileage, and consumers are charged more for excess mileage or wear and tear.
Your Rights as Lessee in California
Car lessees are entitled to legal protections in California. The Moscone Vehicle Leasing Act regulates car leases in the state. This law prohibits excessive termination fees and guarantees lessees the right to end a lease early. The law also allows dealers to charge late payments and reasonable maintenance or repair fees. It also permits a security deposit to cover these costs.
Watch Out for "Lemons"
The California lemon law entitles car lessees to warranty protection against "lemons," or severely defective vehicles. Under this law, a dealer must replace the vehicle if it is unable to repair it after multiple attempts under the warranty. The lemon law applies to all vehicles in the first 18 months of the lease, or under 18,000 miles, whichever comes first. Used vehicles are covered if the dealer provides a written warranty.
Your Rights Under Federal Law
Lessees are also protected by federal regulations. The federal rule that governs a car lease is called Regulation M, and is found in the Code of Federal Regulations at 12 CFR 213. Under this regulation, lessors must disclose all of the major terms of the lease in the initial contract. Lessors in violation of this rule or the contract terms can be sued by the lessee to recover damages, court fees and legal costs.
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