Sample Car Lease Agreement with Explanations

Although the law goes a long way in protecting consumers, the biggest weakness is that it does not require disclosure of the actual Money Factor (interest rate). Instead, it just lists the total amount of interest you will pay over the life of the lease.

The following is the standard form used when leasing a car. See below image for explanations on each section. (Use my Leasing Glossary for any terms you're not familiar with)

1. Lessee: You are the Lessee
2. Amount Due At Signing: The amount needed up-front to take delivery of the vehicle (Does not necessarily have to be cash - you can use a trade allowance - see 6b)
3. Monthly Payment: Shows what your monthly payment is, the number of months, and the total of monthly payments
4. Other Charges: Additional charges outside of your monthly payment such as Disposition Fee
5. Total of Payments: Total amount paid during the lease (does not include any refundable amounts or registration/title fees)
6. Itemization Of Amount Due At Signing:
   1. Amount due at signing: should equal 6B
   2. Itemization: How amount due at signing will be paid - should equal 6A
7. Your Monthly Payment is determined by Steps 8 - 13
8. Gross Capitalized Cost: The negotiated selling price of the vehicle plus any other items you purchase such as service contracts or insurance. If you were upside down on your last car loan, you can add the negative equity here as well
9. Capitalized Cost Reduction: Any amount used as Money Down such as a down payment or trade allowance - it is subtracted from the Gross Capitalized Cost
   1. Adjusted Cap Cost: This is the capitalized cost minus any down payment, trade-in allowance, rebates, or other credits. This is basically the amount that gets financed during the lease
   2. Residual Value: This is what the vehicle is predicted to be worth at the end of the lease. It's also the buyout price if you want to purchase the car at lease end
   3. Depreciation: The amount the vehicle will depreciate during your lease
10. Rent Charge: This is the finance charge - the total amount of interest you will pay. This is determined by the Money Factor which is not required to be displayed in a lease contract
11. Lease Payments: The number of payments to be made - The Term of the Auto Lease
12. Monthly Sales/Use Tax: Taxes added to your base monthly payment
13. Total Monthly Payments: In addition to your monthly payment, you may have to pay personal property taxes, registration and other items. Look for these amounts in your contract
14. Early Termination: Read your contract carefully to understand how early termination charges will be calculated
15. Excessive Wear & Tear: Make sure you understand what counts as excessive Wear & Tear in your contract
16. Excess Mileage Charge: Try to have the mileage limits for your Auto Lease match your driving needs
17. Purchase Option: This is the amount you will pay if you want to purchase the vehicle at lease end. This price can usually be negotiated when your lease ends depending on market conditions. Note that there is an additional fee if you do decide to purchase.