You’ve leased a vehicle and the contract is coming to an end. Do you know what your options and obligations are at the end of the contract? Keep these points in mind to prevent any surprises.
Is it an open-end lease or a closed-end lease? Review the contract to understand what type of lease you have.
An open-end lease means you will have to pay any difference between the retail value of the vehicle at lease-end and the residual value (estimated wholesale value) of the vehicle in the lease agreement. If the vehicle is worth less than the retail value, you pay the difference. If the retail value is more than the residual value, you get the difference. Remember, the automotive business leasing the vehicle determines the retail and residual values. You may also be able to purchase the vehicle at the end of the lease.
A closed-end lease means you have no more payments at the end of the contract unless the vehicle has been damaged by excess wear and tear. You may also have to pay an extra kilometre charge if you have driven a greater distance than the limit set out in the lease contract.
Generally, you have three options under a closed-end lease when it expires. You may:
- return the vehicle
- buy the vehicle (if the lease has a purchase option)
- lease a new vehicle.
If you lease a new vehicle and choose to exercise an option to purchase the vehicle at the end of the lease, the automotive business is not required to provide you with a Mechanical Fitness Assessment (MFA).
If the lease contract has an option to buy, then it must state how much it would cost to buy the vehicle at the end of the lease and how that price is determined as per Section 19(1)(j) of the Cost of Credit Disclosure Regulation.
Regularly review all documents regarding your lease so you understand your obligations and options that may be available at the end of the lease.
Learn more about the language of leasing at amvic.org.