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Vehicle Lease Agreement

This Agreement is entered by and between Jonas Adam, individually or collectively as the "Signee" and Jane Smith, as the "Signer", together referred to as the "Parties".
The Contract is dated [the date both parties sign].

1. Agreement terms

The Parties agree that the following agreement is dependent on the terms presented as follow:

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Vehicle Lease Agreement

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What is a vehicle lease agreement?

A Vehicle Lease Agreement is a legal contract that is made and signed by both parties. It is made between the vehicle owner, also known as the lessor, and the person who is paying the vehicle owner for the right to use and possess their car for a specific contracted period of time, also known as the lessee.  

The lease payment is usually paid on a monthly basis, but any schedule can be arranged between the two parties involved. The payment will typically involve a fee for the depreciation of the vehicle that occurs as it is being driven, a financing fee (think of this as interest payments that are charged when someone takes out a car loan to buy a new car), and any additional sales taxes that pertain to the lease agreement in the location it is being contracted. 

This agreement is a very common practice. In fact, you will not want to lease a vehicle without one. This contract is most frequently used when people are leasing new or used cars, motorcycles, and trucks. It is not limited to these vehicles, though. Any motor vehicle that has a Vehicle Identification Number (VIN) can be leased using one of these contracts. This includes mopeds, electric scooters, and recreational vehicles. Additionally, powerboats that have a Hull  Identification Number (HIN) can also be contracted. 


Why should I use a Vehicle Lease Agreement template?

Using a Vehicle Lease Agreement is highly recommended. It is very important to have on hand any time that you have not received a lease form directly from the dealership. When contracting with dealerships, they will usually have a very detailed dealership lease form that will clearly outline the terms and conditions of the lease agreement between you both. 

When you aren't buying from a dealer, you will need to create an agreement of your own and have it made legally binding with signatures from both parties and a witness at the notary public. We have a great vehicle lease agreement template you can use.

Although we all want to believe the best of our friends and family, and we have great relationships with them, things can always change. If a fight breaks out, for example, and you’ve decided to part ways, you will want some form of protection in place to prevent that bad blood form causing them to yank away the car you rely upon for transportation, increase the payment you agreed upon, or other things. It can also protect you if they decide to report the car as stolen, or claim that you owe them for preexisting damages. 

This Vehicle Lease Agreement will protect both parties. It will be fair and clearly outline the terms of the lease, preventing either side from changing the terms unexpectedly. Even in the best cases, where you remain on good terms, misunderstandings and miscommunication can easily occur. Using our Vehicle Lease Agreement template can ensure that you are both on the same page when it comes to the terms, so you will be protected from misunderstandings or failures in memory. 


What is the lessee (borrower) responsible for in a sample Vehicle Lease Agreement?

Our sample Vehicle Lease Agreement will outline the specific expectations of both parties. When it comes to the lessee, these are some of the responsibilities.

The lessee will have to provide their own insurance for the car. At a minimum, they are legally obligated to obtain liability insurance in case they are responsible for accidents. This will cover damage to the other party’s car, but not your own. The sample Vehicle Lease Agreement will provide a place to specify this coverage. Many lessors (lenders) will insist upon the lessee carrying full coverage, which will protect the leased vehicle as well as the victim’s vehicle in an accident where the lessee is at fault. This gives them the assurance that their car will remain protected. 

The lessee is also going to be responsible for keeping the vehicle in good repair. This means that if they don’t require full coverage, the lessee will be responsible for having the vehicle repaired after collisions when the insurance won’t cover it. They are also responsible for the deductibles that an insurance company will charge when the vehicle is covered and fixed. Similar to how you'd sign a release agreement before undertaking a dangerous activity, so too will you release the car's previous over from similar responsibilities once you have fully inspected the car.

This maintenance and good repair clause also covers the interior of the car. If there is an excessive amount of wear on a vehicle’s interior, the lessee will need to make the repairs. Any dents, scratches, cracked windshields (due to rocks), worn tires, dents, scratches, and significant mechanical damage may be the responsibility of the lessee to repair. 




There are a few people who will limit the number of miles that a lessee can drive their car. The more miles a car acquires, the more it depreciates. Also, higher mileages will lead to the need for new transmissions, brakes, tires, and major maintenance functions much quicker than average, which the lessor may not want to pay for when they aren’t the one putting the mileage on the car. The most common mileage limitation is 12,000 miles per year over the span of the lease agreement. If your agreement spans multiple years, you won’t be penalized for exceeding 12,000 miles in a single year as long as the remaining years are enough below the 12,000 to ensure it averages out, but shorter leases may not allow for long road trips. 

Generally, the penalty for exceeding a mileage limitation is an additional charge at the end of your lease. This will be called a mileage fee on the Vehicle Lease Agreement. Make sure that you both know how many miles you drive on average when negotiating this, as well as any road trips you may be planning during the lease agreement. This mileage limitation is not required, so it is possible to set a mileage restriction high enough that it won’t be met, or choose not to include this clause at all. 



What happens when the Vehicle Lease Agreement comes to the end of its term?

When the Vehicle Lease Agreement comes to an end, the lessee will return the vehicle. A lot of lease agreements are lease to own, which provides the lessor with the opportunity to purchase the vehicle at the end of their contract. If the lessee decides to purchase the vehicle, all of the payments they made during the lease period will be applied against the cost to buy the vehicle. 

The Vehicle Lease Agreement will also dictate the terms of vehicle return if they choose not to purchase the vehicle. This means that extra mileage fees and any additional costs for damages and repairs that were beyond reasonable expectation of use will be owed at that time. 

If you decide to terminate your lease early, you may have to pay a fee as well. While this is certainly not required, it is very common to include one. If the lessor is counting on the income for the car, they will want to take measures to protect themselves against losing that income earlier than expected. If the lease is between friends or family, and not necessarily an income stream, the lessor may choose not to add a penalty fee for early termination, and it may just be that you return the car ahead of the lease term and pay whatever other things are owed, or buy it off of them early. 

If you do have penalties associated with terminating a lease early, then these will be due when you end the lease. Many of these clauses will require you to pay the entire remaining balance of your monthly lease payments. Some of them levy heavy fees that are not quite as much as the total balance but will cost quite a bit of money. There is usually no incentive to end the contract early.  


First image source: https://unsplash.com/photos/9i5eqBarv-k

Second image source: https://www.pexels.com/photo/man-fixing-vehicle-engine-2244746/