A car lease is basically an agreement where you pay a monthly fee to use a car owned by a leasing company. This company is called the “lessor,” and they lease their car to you for a fixed term. You can lease it for 24 to 60 months. When you lease a car from a dealership, keep in mind that the dealer is actually selling this car to the lessor; the lessor owns the car.
But you still have exclusive rights to use the car during the lease. When the lease term expires, you simply return the car to the lessor or purchase it from them at the residual value determined when the agreement was signed. But what if your leased vehicles turned out to be a lemon?
Many people complain that their leased cars have mechanical problems of some sort. But you don’t have to worry; we now have lemon laws in multiple states that cover these issues.
This article will share the golden rules for leasing a car and what to do when it’s a lemon!
Lemon laws are becoming quite popular. Even Quebec passed Canada’s first lemon law barely two years ago. We’ll discuss the nitty-gritty details of this law in this article. But first, let’s go over some basics of leasing a car. What rules should you remember when leasing a vehicle?
We said earlier that a stand lease period lasts 2 to 5 years (we gave you the number in months in the introduction). When your lease ends, the lessor asks you to choose one of these options:
If you end your lease before contract expiration, the lessor will ask for financial penalties (unless you transfer the lease to someone else or buy out the remaining balance). Some lessors offer a sort of early termination process. But that’s something out of the scope of this particular blog.
You shall pay a monthly fee when leasing a car. The vehicle’s negotiated selling price minus any initial down payment will be its capitalized cost. The residual value is what the car is supposed to be worth when your lease ends. The lease term indicates how long you’ll pay for the vehicle’s exclusive usage rights (typically in months). Then there are sales taxes plus acquisition fees. A lease agreement can even include these extra costs as well:
| Security Deposits | Disposition Fees | Excess Mileage & Wear-and-Tear Charges |
| This is a refundable upfront charge to cover potential excess wear or your outstanding payments | This fee is charged when you return the car but neither buy it back or lease another one from the lessor | This is the payment for exceeding your mileage limits or returning damage beyond normal wear & tear |
Car leases often include a standard mileage allowance. It can be something like 10,000-15,000 miles a year. This limit is very important since it affects your lease cost and vehicle depreciation. If you drive over this agreed mileage, you end up paying 15 to 30 cents per extra mile. Keep in mind that these costs may add up to thousands of dollars. But some lease agreements allow for purchasing additional miles upfront at a discounted rate (which is the cheaper option).
One of the key rules to leasing a car is proper maintenance. Proper maintenance safeguards your safety and retains the prime condition of your vehicle. It also minimizes unexpected costs that come at the end of your lease. You can maintain your leased vehicle by doing these:
Lease contracts also have very strict insurance requirements to protect the financial interests of your leased car’s owner, i.e., your lessor. Without adequate insurance, the lessor may terminate the lease or hold you financially liable for damages. You’ll have to maintain liability and collision coverage. A comprehensive insurance coverage also comes under your purview.
Your lease may also require gap insurance that covers the difference between your lease payoff balance and the actual cash value of your car in case it’s stolen. You’ll submit proof of insurance at the inception of the lease. It may need renewal verification during the lease term.
Did you lease a new car only to find out it is defective? Many leased vehicles have these issues. They may have electrical problems. The keyless entry may not work. Seats may not adjust. The heated seats won’t work. The touchscreen may start to glitch. Well, you’re in luck! We have very strong lemon laws in different US states. Pennsylvania even put motorcycles under lemon law protection last year. Let’s discuss what lemon laws mean for you in your state.
Most states in America have lemon laws that protect both leased vehicles and the ones you end up buying. Some states don’t cover leased cars, but you should always check the lemon law in your state by clicking this link. These laws come into effect when your leased car suffers quite substantial damage, impairing its use, value, safety, & other factors. Unsuccessful repairs made during the warranty period after reasonable attempts also fall under this law.
You should first verify if your leased car qualifies as a lemon (Lemon My Vehicle can help you in this regard). If it does qualify, you may request a replacement vehicle or ask for a refund of your down payment (and monthly lease payments). Your damages will be calculated on your lease payments rather than the car’s full purchase price. But these laws do vary from state to state. That’s why you should be careful when considering the rules to leasing a car.
California residents benefit from arguably the most comprehensive lemon law in America. Some of its important provisions include coverage during the dealer’s warranty period, multiple repair attempts, refund/replacement options, and the option to keep the car with a cash settlement. Do check out this table to understand how the lemon law presumption works.
| Lemon Law Presumption Condition | Time / Mileage Threshold | Legal Effect / Entitlement |
| Vehicle out of service for substantial defect | 30 or more cumulative days | Presumed not repaired within reasonable attempts; strong evidence vehicle qualifies as a lemon |
| Vehicle under repair for substantial safety defect | 2 or more repair attempts | Presumed not repaired within reasonable attempts; may qualify for lemon law remedy |
| Vehicle under repair for substantial non-safety defect | 4 or more repair attempts | Presumed not repaired within reasonable attempts; may qualify for lemon law remedy |
| Coverage period | First 18 months or first 18,000 miles | Threshold applies during this initial ownership/lease period |
| Result of meeting any of these criteria | – | Entitled to either replacement vehicle or reimbursement from manufacturer without needing further proof |
Don’t forget that lemon law conditions can be different in other states. You may see different thresholds for repairs or out-of-service days that trigger claims. Different states have different warranty coverage durations. Business-use leased cars may be excluded or limited. In some states, you need mediation or arbitration before resorting to lawsuits for your lemon car.
If you reside in Massachusetts, the lemon law for you covers both new and used cars. But that’s not the same for New Hampshire residents; their version of the lemon law covers new cars only. Similarly, NY’s lemon law is different from other states, so you need to study it carefully.
Keep in mind that a lease is a legal contract that comes with binding obligations. You should read your lease very carefully before signing. Get professional advice if something isn’t clear to you. Do negotiate all essential terms like mileage allowance and residual value.
Don’t forget about checking warranty coverage and how recall issues are handled. You must be aware of early termination penalties and buyout conditions. That’s how you can avoid surprises when leasing a car. If nothing else works, contact Lemon My Vehicle right away.
Leasing a car is a very flexible & easily affordable method to getting a fine four-wheeler to drive around the city. But you have to understand the rules governing leased cars. If your leased car has a defect, you have lemon law protections on your side. Just make sure you’re doing your part of the job and fulfilling your contractual obligations. Know your consumer rights.We at Lemon My Vehicle can help you obtain the necessary monetary compensation for your lemon. Want to know if you qualify for cash compensation? Find out if you qualify for a cash or car replacement for your defective car! Let’s get started with Lemon My Vehicle today!
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