How to Write a Car Lease

by Louise Balle

There are two common scenarios when an individual would decide to lease a car to a friend or third party. If the owner has a license suspension due to tickets or other driving issues, he or she will not be able to drive for a certain amount of time. It is a waste of resources to have the car sit in a driveway unused while payments are still being made. The other scenario is a serious financial problem, such as a sudden job loss, that has made it difficult for the owner to continue payments on the vehicle. When you set up a car lease agreement, it is similar to leasing an apartment or home. The only difference is that a home appreciates in value and a car depreciates quickly.

Calculate the estimated lease payment. To do this, you must first determine the current value of the vehicle. Then estimate the value of the vehicle at the end of the lease---this is also called the residual value. So for a one-year lease, you will need to guess what level of wear and tear will be put on the car after 12 months of use. See Resources for more information about residual value. Factor in any down payment that the lessee plans to make on the lease. Finally, you need to agree on an interest rate for the car. Plug these figures into the lease calculator in the Resources section to get your monthly payment.

Write in all the details that you used for calculating the payment. Start with the value of the car. If this is a new car that is being leased, outline the Manufacturer's Suggested Retail Value (MSRP) and the agreed-upon selling price (value) of the car.

Outline the interest rate that applies to this car lease. Write in any down payment money that the lessee is required to pay at the commencement of the agreement.

Add in the term of the lease agreement. State in clear terms the exact date when this lease will end (month, date, year) as well as the total number of payments.

Include information about the expected wear and tear on the vehicle. For example, you can set a limit for the mileage that can be put on the car during the term of the car lease. If the lessee goes over this mileage limit, clearly state the additional charges for this infraction.

Discuss what will happen if either party decides to terminate the lease agreement early. In what scenarios will an early termination be acceptable? The lessee is commonly required to pay the lessor a hefty fine when the lease is breached and he or she loses the value of any down payment made on the car.

Include a clause in your car lease agreement about an option to purchase the car after the lease agreement is up if desired. Outline how much the car can be sold for at the end of the lease. That selling price is set in stone (unless the seller and buyer both agree on a lower price at lease end).

About the Author

Louise Balle has been writing Web articles since 2004, covering everything from business promotion to topics on beauty. Her work can be found on various websites. She has a small-business background and experience as a layout and graphics designer for Web and book projects.

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