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§3.12 Vehicle Leasing—Contract Requirements

Lesson 3:
Vehicle Repairs, Sales, & Leases

Lease contracts subject to the Vehicle Leasing Act must satisfy certain requirements, including the following [CC §2985.8 (as operative July 1, 2012)]:

  • In writing: The contract must be in writing and contain, in a single document, all the agreements of the lessor and lessee regarding their obligations. [CC §2985.8(a); Kroupa v Sunrise Ford (1999) 77 CA4th 835, 842, 844.]
  • Signed: The lessor and lessee or their authorized representatives must sign the contract. An executed copy of the lease must be provided to the lessee at the signing. [CC §2985.8(g).]
  • VIN: The contract must include the leased vehicle’s identification number. [CC §2985.8(c)(3).]
  • Charges: The contract must disclose any charge retained by the lessor for document processing, or any charge to register or transfer the vehicle. [CC §2985.8(c)(5–(6)).]
  • Cost itemization: The contract must contain a separate statement labeled “Itemization of Gross Capitalized Cost” [CC §2985.8(c)(2)], which must include such items as the agreed-on value of the vehicle, the total amount of insurance premiums to be included, the total amount charged for service contracts, any outstanding prior credit or lease balance, and a listing of other items included in the gross capitalized cost disclosed under Regulation M. [See CC §§2985.7(e), 2985.8(c)(2).]
  • Trade-in: The contract must contain a brief description of each vehicle or other property being traded in and specify the agreed-on value of the vehicle or other property if the amount due at signing or delivery is going to be paid with a net trade-in allowance or if the Itemization of Gross Capitalized Cost includes a portion of the outstanding prior credit or lease balance from the trade-in property. [CC §2985.8(c)(4).]

Lease contracts must also include various notices and warnings, including the following:

  • Regulation M: The contract must disclose all the information prescribed by Regulation M, even if Regulation M doesn’t apply to the transaction. [CC §2985.8(c)(1); see CC §2985.7(e).]
  • Notice to read: The contract must warn the lessee to read the contract and include related notices. [CC §2985.8(d).]
  • No cooling-off period: The contract must include a “no cooling-off period” notice. [CC §2985.8(e).]
  • Return and refund: The contract must include the statement regarding the return and refund policy if a credit application is not approved. [CC §2985.8(f).]
  • Gap liability: The first page of the contract must contain a “Gap Liability Notice” if the lessee will be responsible for the difference between the amount due on early termination of the lease and the amount of any insurance proceeds if the vehicle was stolen or completely destroyed. [CC §2985.8(j).]
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