Car Lease Term: Things to Know

When agreeing to a car lease term, it is important to understand the specific details of the lease agreement and what your obligations are as a result.

Car Warranty

In many cases, if you are leasing a new car then there will also be a new car warranty that covers most repairs that are needed over the first few years. However, in some cases the car warranty may run out before the term of the lease. If the warranty expires before the lease term, then you will be responsible for paying for any needed repairs.

Residual Amount

At the end of your car lease term there will be a residual amount. This is the predetermined value of the car at the end of the lease set by the dealership. If you decide that you want to keep the car, then you will need to pay the residual amount or make financial arrangements to finance the residual amount in order to purchase the car.

Default

Occasionally, individuals leasing a car may find it necessary to break the lease. If this occurs in most cases the dealership or finance company will pick the car up and repossess it. However, this does not relieve the person leasing the vehicle from their financial obligation. Often leases have a provision that should be lease term be defaulted upon, then the borrower will be obligated to pay for repossession and other fees that are incurred as a result of the default.