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Vehicle Leasing Agreement

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Warranties




Frequently Asked Questions
What is a supplementary warranty?A supplementary warranty is when the lessor or a third party will be providing a warranty for repairs that covers the period when the manufacturer's warranty expires until the end of the lease term.


Your Vehicle Leasing Agreement

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Initials: ___________ Page of

VEHICLE LEASING AGREEMENT

THIS VEHICLE LEASING AGREEMENT (this "Lease") dated this _____ day of _____________, 20____

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 below (the "Vehicle") to the Lessee, and the Lessee desires to lease the Vehicle from the Lessor for business use.
    • New/Used: Used
    • Year: _________
    • Make: ____________________
    • Model: ____________________
    • Body Type: Sedan
    • Colour: __________________
    • VIN: _________________________________
  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 residual value (the "Residual Value") of the Vehicle is $_________________.
  7. The amount to be amortised over the term of the Lease is $1.00.
  8. The Lease interest rate is 0% per annum.
  9. The term of the Lease is none month (the "Term").
  10. This Lease includes unlimited kilometres. The Lessee will not be required to pay any fees for kilometres used.
  11. The Lessee will provide a down payment of $_________________, which will be subtracted from the amount to be amortised over the Term.
  12. The total amount payable by the Lessee upon signing this Lease is $1.00. At the conclusion of the Lease, if all payments are made, this will be the total cost of the Lease, excluding any cost for repairing excess wear and tear to the Vehicle.
  13. The monthly payment under this Lease is $1.00 (the "Monthly Payment"). Any GST 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 electronic funds transfer, cheque, post-dated cheque, money order, bank draft or pre-authorised payment.
  15. 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.
  16. Lessee Obligations
  17. 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 $1,000,000.00;
    2. comprehensive fire and theft insurance with a maximum deductible of $250.00; and
    3. collision insurance with a maximum deductible of $250.00.

    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").

  18. 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.
  19. 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.
  20. 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 licence 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 seised, 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 territory in which this Lease is signed without the Lessor's prior written consent, with the exception of trips within continental Australia 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.
  21. 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.
  22. Inspections
  23. 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.
  24. The Lessor has the right to inspect the Vehicle, without prior notice, at all reasonable times during the Term of this Lease.
  25. Event Of Default
  26. 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 seises 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.
  27. In the event that the Lessee defaults under this Lease, the Lessee will be required to immediately pay all amounts owing applicable to the Vehicle for the remainder of the Term.
  28. 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.
  29. Excessive Wear and Tear
  30. 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.
  31. 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, wings, 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 tyre or regular tyres;
    4. tyres 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 territory where this Lease is signed.
  32. If the Vehicle has excess wear and tear, there will be a charge to the Lessee for the excess wear and tear.
  33. 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.
  34. Returning the Vehicle
  35. 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.
  36. 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.
  37. 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.
  38. Realised Value
  39. In this Lease, Realised 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.
  40. The Lessee will not be held liable for the difference between the Residual Value of the vehicle and its Realised Value.
  41. General Provisions
  42. This Lease may not be assigned to a third party without the Lessor's prior written consent and approval.
  43. This Lease will pass to the benefit of and be binding upon the Lessee's respective heirs, executors, administrators, successors and assigns.
  44. This Lease may only be amended or modified by a written instrument executed by both parties to this Lease.
  45. 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.
  46. 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.
  47. If there is a conflict between any provision of this Lease and any form of lease prescribed by applicable legislation of the Australian Capital Territory (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.
  48. 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.
  49. This Lease constitutes the entire agreement between the parties to this Lease and there are no further items or provisions, either oral or otherwise.
  50. 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.
  51. This Lease will be governed by the laws of the Australian Capital Territory.

IN WITNESS WHEREOF the Parties have executed this Lease dated this _____ day of _____________, 20____.

 

_______________________________
______________________(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


Itemisation of Gross Capitalised 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) Itemisation of any other good or service not included above ..................

 

none

     
   
 

(G) Total Gross Capitalised Cost .................................................................

 

$1.00



Monthly Payment Calculation

The remainder of this document will be available when you have purchased a licence.

Last Updated February 29, 2024

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What is a Vehicle Leasing Agreement?

A Vehicle Leasing Agreement is a document that outlines the terms and conditions between a vehicle lessor and lessee.

The lessor is the party that owns the vehicle, and the lessee is the one leasing it. 

You can use LawDepot’s Vehicle Leasing Agreement for new or previously-owned cars, utes, semi-trucks, and more. Customise our template for private or commercial purposes.

A Vehicle Leasing Agreement is also known as a:

  • Car rental agreement
  • Vehicle hire contract
  • Car hire contract

What are the rules for leasing vehicles in Australia?

Needless to say, it’s best practice for any independent rental company or private lender to provide a standard rental agreement.

Although this isn’t a hard rule, a contract is important because it reduces the risk of misunderstandings and provides evidence for enforcing the agreement. 

It is crucial, however, for your Vehicle Lease Agreement to comply with Australian Consumer Law. In general, this means that the contract should:

  • Be presented clearly and explained in plain language
  • Contain fair terms that don’t subjugate consumer rights
  • Be made readily available to any party affected by it

The vehicle owner may also need to register their security interests on the Personal Property Securities Register if the lease is longer than two years (according to the Personal Property Securities Act 2009).

This helps ensure that the owner has priority over any other security interest in the vehicle. In other words, if a debt collector pursues the lessee, their claim to the vehicle will have less priority than the vehicle owner.

How do I write a Vehicle Leasing Agreement?

Use LawDepot’s Vehicle Lease Agreement template to create a document for a fraction of the cost of an attorney. Simply answer our user-friendly questionnaire to customise the template to your situation and jurisdiction.

Step 1: Provide information about the vehicle

A clear and specific vehicle description typically includes:

  • Whether its use is primarily for business or personal purposes
  • Whether it’s new or used
  • Body type (e.g., sedan, semi-truck, ute, etc.)
  • Year (e.g., 2022, 2023)
  • Make (e.g., Toyota)
  • Model (e.g., Hilux)
  • Colour (e.g., black)
  • Vehicle Identification Number (VIN)

What’s a VIN?

All vehicles are assigned a unique 17-character VIN ("vehicle identification number" or chassis number) when they're manufactured. To find this number, check your driver’s side door, accident reports, insurance records, or repair work orders. 

Step 2: Add party details

Your document must include information about the lessor and lessee:

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

Step 3: State any warranty and insurance terms

If needed, you can apply two types of warranties to the lease:

  1. A manufacturer’s warranty comes with the original purchase of a vehicle. If there’s still coverage, state how many years are left on the warranty. 
  2. A supplementary warranty may be available when the owner (or a third party) provides a warranty for repairs. This warranty may take effect when the manufacturer’s warranty expires, and it may last until the end of the lease term. If your agreement includes a supplementary warranty, state how much it will cost the lessee.

In most jurisdictions, auto insurance is a legal requirement. So, your Vehicle Lease Agreement should state the:

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

What’s gap coverage?

It 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 stops the lessee from having to pay further charges. 

Step 4: Customise your lease terms

Consider how these key terms may (or may not) apply to your situation:

  • The lease length
  • The allowable limit of kilometres (e.g., unlimited or a specified amount)
  • Pricing information such as the vehicle’s value, any added fees (e.g., late fees, cleaning fees, etc.), a down payment (optional), the lease rate, payment schedules, pre-authorised payments, security deposits, and taxes
  • An option to purchase
  • Obligations should either party end the lease early

Step 5: Prepare to sign

You can use the “Additional Clauses” section to write a unique term that wasn’t already addressed in the questionnaire. In most cases, this won’t be needed. Consult a lawyer if you need more support about applying terms and conditions to your contract. 

When you’re ready, execute your Vehicle Lease Agreement by having the lessor and lessee sign the document.

What is a Vehicle Leasing Agreement with the option to purchase?

An option to purchase allows the lessee to buy the vehicle at any time during 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

In other words, if a condition isn’t met, then either party can terminate the contract. A conditional purchase contract may affect your ability to deduct the vehicle lease as a business expense

Generally, the purchase price is the residual value of the vehicle, unless the lessee negotiates a lower price. The residual value is the estimated value of the vehicle at the end of the lease term.

Can I end the Vehicle Leasing Agreement early?

Your ability to get out of your agreement early depends on the contract and the other party’s willingness to accommodate your request

If the other party consents to early termination without penalty, you’ll be able to end your lease without any problems.

However, the contract may include a term for early termination that requires the lessee to pay the difference between the residual value and the realized value. The residual value (i.e., the buy-out price) is the vehicle’s estimated value at the end of the lease term. The realized value is the actual sale price the owner receives for the vehicle when the vehicle is sold. 

As such, it’s crucial to review your contract and communicate promptly with the other party if you need to exit the agreement early. If possible, you can use a Termination Agreement to renounce contractual responsibilities.

What happens at the end of a vehicle lease?

At the end of the vehicle lease term, the lessee returns the vehicle to the lessor. 

If the lessee paid a security deposit at the beginning of the lease, the lessor will inspect the vehicle and determine if the lessee will receive their deposit back.

Besides properly maintaining your leased vehicle, lessees can better ensure the return of their security deposit by removing all personal items from the vehicle, vacuuming out the interior, and washing the exterior.

Is a Vehicle Lease Agreement a legally binding document?

Yes, when executed properly, a Vehicle Lease Agreement is a legally binding contract. As such, it’s possible for either party to take legal action against the other if someone doesn’t uphold the agreement.

A legally binding vehicle Lease Agreement must contain the following elements:

  1. Offer and acceptance: The lessor offers a vehicle for hire under certain terms and conditions. The lessee may negotiate some terms, but they must both agree to the contract.
  2. Consideration: Each party gets something valuable from the agreement. In this case, the lessee gets possession of a vehicle for a set time, and the lessor generates income from the agreement.
  3. Mutuality: The parties agree that they intend to enter an enforceable contract. 
  4. Legality: The contract doesn’t contain any unlawful promises or considerations. For instance, the lessor cannot conceal any known defects; they cannot mislead the lessee about liability or insurance coverage.
  5. Capacity: Each party has the legal ability to sign the contract

Related Documents:

  • Amortisation Schedule: Create a schedule to help break down the costs of a loan and budget accordingly.
  • Assignment: Transfer all (or part) of one’s interest or rights in a contract to another person.
  • Bill of Sale: If you need to buy or sell a car, use a Bill of Sale to transfer ownership rights from one party to another.
  • Demand Letter: Send a formal letter to request payment of an outstanding bill or to request an action from another party.
  • Equipment Hire: Rent out equipment such as appliances or heavy machinery to another party.
  • Termination Agreement: If all parties agree, they can use this document to discontinue or cancel an existing contract.
  • Personal Property Rental Agreement: Use this contract to rent personal property (excluding real estate).
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