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Automobile Leasing

The number of consumers who lease cars in the United States has grown dramatically in the past 15 years. Like any new, growing market, automobile leasing was an area ripe for abuse. From creative financing to inflated return charges, leasing included some unexpected pitfalls for unwitting consumers. Illinois recently enacted a law that governs the automobile leasing industry in the state. The purpose of this law is to promote consumer understanding of vehicle leasing by providing for the disclosure of lease obligations to consumers.

The Motor Vehicle Leasing Act defines the terms most commonly used in leasing transactions, such as "adjusted capitalized cost," "average periodic depreciation," and "base lease payment," so that these definitions are universally understood by all parties to the lease transaction. Under circumstances such as automobile leasing, any party who is not familiar with the terminology involved is at a significant disadvantage when it comes to negotiating the best deal. The Act provides clear definitions under which all parties are bound.

One of the potential problem areas for a consumer ("lessee") is "gap insurance" or "gap protection." Gap protection is a type of insurance that provides that, in the event of a total loss of the leased vehicle, a third person will pay the difference between the amount owed by the lessee and the actual cash value, or portion thereof, of the vehicle actually received by the car dealership ("lessor") from the insurance company or another person. This is known as the "gap amount." Lessees must make sure that they have this gap insurance in the event that the vehicle is damaged or stolen before the end of the lease. This is different than traditional automobile insurance and is usually purchased as additional coverage. The Act requires that the lessor inform the lessee whether he is responsible for the gap amount, otherwise the lessor will waive its contractual rights to hold the lessee liable for the gap amount. A lessee should always make sure that the gap is covered or a significant loss could result.

The Act also sets forth specific terms that must be included in all consumer leases. A lessee has a right to cure the first time he or she is in default on a payment for the sole reason of failure to make a timely payment. Other key provisions address early termination of the lease, restrictions on the lessee's liability for early termination, and standards by which excessive wear and damage to the vehicle are assessed.

You may report any violation of the provisions of the Act to the Attorney General or the State's Attorney of any Illinois county, all of whom are charged with enforcement of the Act. When you are researching whether to lease an automobile, understand that leasing is much different than buying. Make sure that you are familiar with leasing terminology before you go to the car dealership.

This website is not intended to constitute legal advice or the provision of legal services. By posting and/or maintaining the website and its contents, Lucas Law does not intend to solicit business from clients located in states or jurisdictions outside of Illinois wherein Lucas Law or its individual attorney(s) are not licensed or authorized to practice law.

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