Consumer Leasing Act
What is the Consumer Leasing Act?
The Consumer Leasing Act is a federal law that lists specific requirements for companies that lease personal property to customers for their personal use.
Originally passed in 1976, the goal of the Consumer Leasing Act was to make sure that potential lessees of personal property obtained clear lease terms before they entered into contracts. With the information provided by the Consumer Leasing Act, lessees could easily compare the costs of different leases to see which company had the best deal. They could also compare the lease terms with the costs of buying with credit or using cash to cover the purchase. If the lessee has the option to buy the property at the end of the lease, the means for calculating the price should also be included in the lease terms.
Other terms of the Consumer Leasing Act limit payments associated with leases, such as balloon payments due at the end of the lease. Should the lessee decide to extend the lease, he or she should receive updated disclosures before officially signing the new contract.
Consumer Leasing Act example
Many individuals choose to lease their cars rather than buy them. If your lease is for a period longer than four months and your contract obligation does not exceed $50,000, the Consumer Leasing Act applies to your transaction.
For example, if your lease dictates that you will pay $200 a month for a period of three years plus a one-time upfront fee of $1,500, this transaction falls under the Consumer Leasing Act. Your total expected cost under this transaction is $8,700. To adhere to the Consumer Leasing Act, the company that leases the vehicle must clearly disclose any penalties associated with the lease, such as fees required if you go over a certain mileage.
Not sure whether leasing a car or buying one is the better choice for you? Crunch the numbers using Bankrate’s handy lease vs. buying calculator!