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Vehicle Leasing Agreement

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Vehicle Leasing Agreement Page of
Initials: ______________________________ Page of

VEHICLE LEASING AGREEMENT

THIS VEHICLE LEASING AGREEMENT (this "Lease") dated this 9th day of February, 2023

BETWEEN:


________________________ of _____________________________________
(the "Lessee")

OF THE FIRST PART

- AND -


________________________ of _____________________________________
(the "Lessor")

OF THE SECOND PART

IN CONSIDERATION of the mutual covenants and promises in this Lease and other valuable consideration, the sufficiency of which consideration the Parties hereby acknowledge, the Lessor leases the Vehicle described in this Lease to the Lessee, and the Lessee leases the Vehicle from the Lessor on the following terms:

  1. Vehicle Details
  2. The Lessor desires to lease the vehicle described as a new 2023 __________ __________ __________, with vehicle identification number __________ (the "Vehicle") to the Lessee, and the Lessee desires to lease the Vehicle from the Lessor for personal, family or household use.
  3. The Lessor owns the Vehicle that is the subject of this Lease.
  4. Lease Cost Disclosure
  5. The full retail value of the Vehicle as of this date is $1.
  6. The amount to be amortized over the term of the Lease is $1.00.
  7. The residual value (the "Residual Value") of the Vehicle is $_______.
  8. The Lease interest rate is 4.5% per annum.
  9. The term of the Lease is one month (the "Term").
  10. This Lease includes unlimited miles. The Lessee will not be required to pay any fees for miles used.
  11. The Lessee will provide a down payment of $_______, which will be subtracted from the amount to be amortized over the Term.
  12. The total amount payable by the Lessee upon signing this Lease is $1.00.
  13. The monthly payment under this Lease is $1.00 (the "Monthly Payment"). Any sales/usage tax would be allocated over the Term of the Lease and added to that monthly payment. The first payment will be due upon signing and the following payments will continue each month on the same day of the month as the Lease is signed. If a monthly payment is due on the 29th, 30th, or 31st, then it is due on the last day of the month in a month that does not have a 29th, 30th, or 31st.
  14. Monthly Payments may be made by check, post-dated checks, money order, bank draft or pre-authorized payment.
  15. At the conclusion of the Lease, if all payments are made, the total cost of the Lease will be $1.00, excluding any cost for repairing excess wear and tear to the Vehicle.
  16. Except as expressly provided in this Lease, no warranties, either express or implied, statutory or otherwise, as to any matter whatsoever, have been given by the Lessor.
  17. Lessee Obligations
  18. The Lessee will assume all risk of loss and damage to the Vehicle. The Lessee is responsible for insuring the Vehicle based on its full value, with the following coverage:
    1. bodily injury and property damage coverage in the minimum amount of $1,000,000;
    2. comprehensive fire and theft insurance with a maximum deductible of $250; and
    3. collision insurance with a maximum deductible of $250.

    The Lessee will ensure that the Lessor is named as registered owner, and as "Additional Insured" and loss payee in the insurance policy (the "Insurance Policy").

  19. The Lessee agrees to co-operate with the Lessor and the insurance company in pursuing or defending any claim or action resulting from the use of the Vehicle. Any award or money the Lessee receives as a result of a claim or action is to be assigned to the Lessor. If the Lessee fails to maintain insurance or if a claim is denied by the Lessee's insurance company for any reason, the Lessee remains responsible to pay the total cost of the Lease.
  20. The Lessee agrees to indemnify the Lessor from any loss, and in order to prevent such loss, the Lessee will do the following:
    1. keep the Vehicle free of encumbrances, such as fines and liens;
    2. indemnify the Lessor from all claims and expenses resulting from the maintenance and use of the Vehicle; and
    3. pay all amounts owed under this Lease without deducting any amounts the Lessee claims to be owed by the Lessor.
  21. The Lessee is prohibited from using, transferring, or altering the Vehicle, as follows:
    1. the Vehicle is not to be used by drivers without an appropriate license or those restricted under the Insurance Policy;
    2. the Vehicle is not to be used illegally, in a manner contrary to the Insurance Policy, or as a vehicle for hire or public transport;
    3. the Lessee will not transfer or assign this Lease, or ownership of the Vehicle, to a third party, except with the Lessor's prior written consent. The Lessee will also ensure that the Vehicle is not seized, confiscated, or involuntarily transferred, even if the Vehicle is the subject of judicial or administrative proceedings;
    4. the Lessee will not remove the Vehicle from the commonwealth in which this Lease is signed without the Lessor's prior written consent, with the exception of trips within continental North America of less than 60 days; and
    5. the Lessee will not install accessories in the Vehicle, or alter the Vehicle in any way, without the Lessor's prior written consent.
  22. During the Term of the Lease, the Lessee will be responsible for paying all fees required for registration, licensing, testing, and any inspection of the Vehicle requested by a government or other authority. The initial cost of registration must be paid prior to removing the Vehicle from the Lessor's possession.
  23. Inspections
  24. The Lessee acknowledges that the Vehicle has been inspected and the Lessee accepts the Vehicle as being in a good state of repair, not including manufacturer's defects which would not have been visible upon inspection.
  25. The Lessor has the right to inspect the Vehicle, without prior notice, at all reasonable times during the Term of this Lease.
  26. Event Of Default
  27. The Lessee will be in default under this Lease if:
    1. the Lessee fails to make a Monthly Payment on the due date;
    2. a bankruptcy, receivership, or insolvency proceeding is initiated by the Lessee or against the Lessee;
    3. a creditor or a government authority seizes the Vehicle;
    4. the Lessee has misrepresented personal or financial information;
    5. the Lessee is no longer living;
    6. the Vehicle is stolen or damaged beyond repair;
    7. the Vehicle is not returned at the end of the Term; or
    8. the Lessee breaches any other term of this Lease.
  28. In the event that the Lessee defaults under this Lease, the Lessee will be required to pay the amounts applicable to the Vehicle during the remainder of the Term.
  29. If the Lessee defaults under this Lease, the Lessor will pursue the remedies outlined in this Lease, in addition to any other remedies allowed by law. If the Lessee defaults, the Lessor may terminate this Lease, and may recover the Vehicle and sue the Lessee for damages.
  30. Excessive Wear and Tear
  31. The Lessee is responsible for ensuring that the Vehicle is regularly maintained and is kept in good repair. Regular maintenance and repair includes, but is not limited to, the excessive wear and tear provisions below. The Lessee is to pay the costs of regular maintenance and any costs for repairs not covered by warranty.
  32. Excessive wear and tear will include, but is not limited to, the following, even if covered by the Lessee's Insurance Policy:
    1. cracked, damaged, or tinted glass;
    2. dented or damaged body panels, fenders, lights, or paint;
    3. missing equipment or accessories that were provided with the Vehicle, including but not limited to wheel covers, jack, wheel wrench, and spare tire or regular tires;
    4. tires with less than 3mm of tread remaining at the lowest point;
    5. damage to the interior of the Vehicle, including but not limited to dash, seats, floor covering, upholstery, truck liner, and center console (if applicable); or
    6. mechanical damage that affects the safe, proper, or lawful operation of the Vehicle, which would include damage that causes the Vehicle to fail a safety inspection in the commonwealth where this Lease is signed.
  33. If the Vehicle has excess wear and tear, there will be a charge to the Lessee for the excess wear and tear.
  34. During the Term, damaged or lost parts, equipment, or accessories may be replaced with items of equal or better quality and construction, and replacement items that meet this standard will be accepted as original items, upon return of the Vehicle.
  35. Returning the Vehicle
  36. When the Lessee returns the Vehicle at the end of the Lease, the Lessee must pay the following amount:
    1. the cost of repairs needed as a result of excess wear and tear.
  37. The Lessee may return the Vehicle at any time during the Lease, by paying the following amounts:
    1. the Monthly Payment multiplied by the number of months remaining in the Term;
    2. the cost of repairs needed as a result of excess wear and tear; and
    3. any outstanding amounts under this Lease.
  38. After the Lessee has returned the Vehicle and paid any required costs and fees, the Lessor will return the following amounts, or the remaining portions of these amounts, to the Lessee:
    1. any money received from an insurance claim or action that is not used to repair or replace the Vehicle.
  39. Realized Value
  40. In this Lease, Realized Value is understood to mean any of:
    1. the price received by the Lessor for the Vehicle at disposition;
    2. the highest offer for disposition of the Vehicle; or
    3. the fair market value of the Vehicle at the end of the Term.
  41. The Lessee will not be held liable for the difference between the Residual Value of the vehicle and its Realized Value.
  42. General Provisions
  43. This Lease may not be assigned to a third party without the Lessor's prior written consent and approval.
  44. This Lease will pass to the benefit of and be binding upon the Lessee's respective heirs, executors, administrators, successors and assigns.
  45. This Lease may only be amended or modified by a written instrument executed by both parties to this Lease.
  46. All costs, expenses and expenditures including, and without limitation, the complete legal costs incurred by enforcing this Lease as a result of any default by the Lessee, will be added to the amount then outstanding and will immediately be paid by the Lessee.
  47. The clauses and paragraphs contained in this Lease are intended to be read and construed independently of each other. If any part of this Lease is held to be invalid, this invalidity will not affect the operation of any other part of this Lease.
  48. If there is a conflict between any provision of this Lease and any form of lease prescribed by applicable legislation of Virginia (the "Act"), that prescribed form from the Act will prevail and such provisions of the Lease will be amended or deleted as necessary in order to comply with that prescribed form. Further, any provisions that are required by the Act are incorporated into this Lease.
  49. Headings are inserted for the convenience of the parties to this Lease only and are not to be considered when interpreting this Lease. Words in the singular mean and include the plural and vice versa. Words in the masculine mean and include the feminine and vice versa.
  50. This Lease constitutes the entire agreement between the parties to this Lease and there are no further items or provisions, either oral or otherwise.
  51. The Lessee is entitled to a complete copy of this Lease. This Lease should not be signed until all terms have been set out and the Lessee has read it entirely.
  52. This Lease will be governed by the laws of Virginia.

IN WITNESS WHEREOF the Parties have executed this Lease on this _______ day of _______________________.

 

_______________________________
______________________(Lessor)

 

_______________________________
______________________(Lessee)


NOTICE TO THE LESSEE:

(1)  This is a lease. You are not buying the motor vehicle previously described;

(2)  Do not sign this Lease before you read it or if it contains any blank spaces to be filled in;

(3)  You are entitled to a completely filled in copy of this Lease when you sign it;

(4)  Warning -- unless a charge is included in this Lease for public liability or property damage insurance, payment for that coverage is not provided by this Lease.

I do hereby acknowledge receipt of a completed and signed copy of this Lease. ________

Lessee Initials

I do hereby acknowledge receipt of a completed and signed copy of this Lease. ________

Lessor Initials


Itemization of Gross Capitalized Cost

(A) Value of the vehicle as equipped at the time of entering into the Lease ...

 

$1

(B) Values and descriptions of accessories and optional equipment the Lessor agrees to add to the vehicle after entering into the Lease ....................

 


none

(C) Premium to be paid for each policy of insurance .....................................

 

none

(D) Charge for each service contract ..............................................................

 

none

(E) Outstanding Lease balance or prior credit balance  .................................

 

none

(F) Itemization of any other good or service not included above ..................

 

none

     
   
 

(G) Total Gross Capitalized Cost .................................................................

 

$1.00



Monthly Payment Calculation

Gross capitalized cost. The agreed upon value of the vehicle ($1) and any items the Lessee pays over the Term (such as service contracts, insurance, any outstanding prior credit or Lease balance) .............................

 

$1.00

Capitalized cost reduction. The amount of the trade in allowance and down payment made by the Lessee to reduce the gross capitalized cost ......

-

$__________

Adjusted capitalized cost. The amount used in calculating the periodic payments ........................................................................................................
(This amount along with the additional early termination charges will be used in determining your early termination liability.)

=

$1.00

Residual Value.  The value of the vehicle at the end of the Lease used in calculating the base monthly payments ........................................................

-

$__________

Depreciation and any amortized amounts.  The amount charged for the vehicle's decline in value through normal use and other items paid over the Term ..............................................................................................................

=

$1.00

Interest charge.  The interest charged in addition to the depreciation and any amortized amounts ..................................................................................

+

$0.00

Total of base monthly payments.  The depreciation and any amortized amounts plus the interest charge ..................................................................

=

$1.00

Lease payments.  The number of payments in your Lease ..........................

 

/ 1

Base monthly payment...............................................................................

=

$1.00

Monthly sales/usage tax..............................................................................

 

_____

Total Monthly Payment...............................................................................

=

$1.00

Last Updated November 1, 2022

What is a Vehicle Leasing Agreement?

A Vehicle Leasing Agreement is used when possession of a vehicle is temporarily transferred from the owner (lessor) to someone (lessee) who pays to rent the vehicle for a predetermined period. The agreement should outline the following:

  • The lessor’s and lessee’s personal information
  • Details about the vehicle
  • The lease’s duration
  • Payments and leasing rates
  • Insurance and warranty

You can use a Vehicle Leasing Agreement with any motor vehicle with a Vehicle Identification Number (VIN), including cars, trucks, motorcycles, motorized scooters and mopeds, recreational vehicles, and power boats with a Hull Identification Number (HIN).

A Vehicle Leasing Agreement is also known as:

  • Car Lease Agreement
  • Vehicle Lease Contract
  • Motor Vehicle Lease Form
  • Lease to Own Contract

Why should I use a Vehicle Leasing Agreement?

A Vehicle Leasing Agreement helps to protect the interests of the lessor and lessee. Having the terms of the agreement documented reduces the risk of misunderstandings or miscommunications between the two parties.

It's a good idea to use a Vehicle Leasing Agreement whenever a vehicle lease is being negotiated between two parties where a dealership lease form hasn't been provided.

What happens at the end of the vehicle lease term?

The lessee returns the vehicle to the lessor when the term is up, and the Vehicle Leasing Agreement expires. However, the lessee may also purchase the vehicle from the lessor if the contract provides that option. In this case, the lease payments made by the lessee during the duration of the agreement will typically be applied to the total purchase price.

A Vehicle Leasing Agreement also lists any penalties for ending the lease before the term is up. Early termination penalties can include paying the balance of the remaining lease payments, along with additional charges.

What are the lessee’s responsibilities?

The vehicle's lessee is responsible for providing proof of insurance and ensuring the vehicle remains in good condition. The lessor may bill the lessee for the necessary repairs if they return the vehicle with excessive interior wear, large dents or scratches, or any significant mechanical damage.

Who is responsible for registering a leased vehicle?

The vehicle's owner (the lessor) is responsible for registering the leased vehicle even though it will be in possession of the lessee.

How do I create a Vehicle Leasing Agreement?

You can easily create a Vehicle Leasing Agreement by completing LawDepot’s questionnaire. Using our template ensures you complete the following necessary steps.

Step 1: State whether the vehicle is for personal or business use

Start your Vehicle Leasing Agreement by stating whether the lessee needs the vehicle for personal use or business purposes.

If you're unsure whether the rental is for personal or business use, consider why the renter needs the vehicle. If they're using the vehicle as part of their occupation, it's for business use. If they're using the vehicle for everyday things that aren't related to their job, it's personal use.

Step 2: Provide your state

Provide your location and LawDepot will ensure your Vehicle Leasing Agreement is tailored to your state’s laws.

Step 3: Include the lessor’s and lessee’s details

Your agreement needs to include information about the vehicle’s owner and renter, such as:

  • Full names
  • Addresses
  • Whether they’re an individual or organization

Step 4: Describe the vehicle

It’s essential that you provide descriptive details about the vehicle because you want to be clear about which vehicle is being leased. Some details you should provide are:

  • Color (e.g., black)                     
  • Make (e.g., Ford, Toyota)
  • Model (e.g., Focus, Corolla)
  • Year (e.g., 2022, 2023)
  • Body type (e.g., SUV, pick-up truck)
  • Vehicle Identification Number (VIN)
  • Whether it’s new or used 

All vehicles are assigned a unique 17-character VIN ("vehicle identification number" or chassis number) when they're manufactured. If you don't know your VIN, leave your answer blank for now and write it in after you have printed your document but before you have signed the document.

If your vehicle was manufactured in 1969 or later, your VIN is located on the driver's side dash, viewable through the windshield. You can also check the driver's side door, accident reports, insurance records, or repair work orders.

Step 5: State the lease details

Your Vehicle Leasing Agreement needs to state for how many months the renter is leasing the vehicle and if there is a limit on the number of miles per year they can drive it. 

You need to include the lease rate, as well. The lease rate or annual percentage rate (APR) is the annual rate of interest charged by the lessor on the total lease payment. For example, 4.5%.

You can also include an option to purchase the vehicle in the agreement. This option allows the lessee to choose between buying the vehicle at any time during the lease or at the end of the lease. The purchase price will likely be the approximate residual value of the vehicle at the time of negotiations.

Please note that including an option to purchase may change the nature of the agreement from a lease to a conditional purchase contract which may affect its deductibility as a business expense.

Step 6: Provide the lease costs and fees

In order to calculate the total cost of the lease, the agreement needs to include the:

  • Vehicle’s full retail value: The amount the vehicle would currently sell for, excluding any sales tax and fees.
  • Vehicle’s residual value: The vehicle's value at the end of the lease term.
  • Amount to be amortized over the lease term: The amount to be paid over the lease term
  • Security deposit: A refundable deposit that is held as security in case there is damage to the vehicle or non-payment of the lease payment.

Also, describe any extra fees and whether there is a down payment included.

Step 7: Outline the monthly payments

Your agreement also needs to outline details about the monthly payments.

Determine the sale tax and whether there will be late fee charges. You also need to state when the first payment is due and if the lessee is allowed to make pre-authorized payments.

Step 8: State if early lease termination is an option

Decide if you'd like the lessee to be responsible for the difference between the residual value and the realized value if the lease is terminated early.

The residual value is the vehicle's estimated value at the end of the lease term. In this case, it's also known as a buy-out price. The realized value is the actual sale price the owner receives for the vehicle when a renter terminates the lease early, and the vehicle is sold.

The renter isn’t responsible for the difference between the residual value and the actual realized value if the lease is terminated at the end of the lease term.

Step 9: Outline any warranties

A couple of types of warranties can be applied to the lease: the manufacturer's warranty and a supplementary warranty.

The manufacturer's warranty is the warranty that comes with the original purchase of a vehicle. If there is still a warranty left on the vehicle, state how many years of coverage remain.

The supplementary warranty is when the owner or a third party provides a warranty for repairs that covers the period between when the manufacturer's warranty expires and the end of the lease term. State how much the supplementary warranty will cost the lessee if your agreement includes it.

Step 10: Outline insurance and deductibles

Your Vehicle Leasing Agreement needs to outline the:

  • Minimum insurance coverage
  • Maximum deductible on fire and theft insurance
  • Maximum deductible on collision coverage
  • Gap coverage (if applicable)

Gap coverage covers the difference between what the insurance company says the car is worth and what the lessee would have to pay under the lease if the vehicle is destroyed. This coverage stops the lessee from having to pay further charges.

Step 11: Include additional clauses (if necessary)

If any terms or unique issues haven't been addressed, include them in your agreement as additional clauses.

Step 12: Sign the agreement

Make your Vehicle Leasing Agreement legally binding by having the lessor and lessee sign the document. 

Related Documents:

  • Bill of Sale: Document the sale of an item to a purchaser
  • Sales Agreement: a more detailed receipt used to document the sale of goods and services
  • Loan Agreement: Describe the terms and conditions between a lender and a borrower
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