FRB: Vehicle Leasing: Leasing vs. Buying: Excessive Wear

	Glossary
Leasing vs. Buying Excessive Wear

Leasing	Buying
Most leases limit the amount of wear to the vehicle. You will likely have to pay extra charges if you exceed those limits, if you return the vehicle.	There are no limits or charges for excessive wear to the vehicle, but excessive wear will lower the vehicle�s trade-in or resale value.
Excessive-wear-and-tear standards. Excessive wear and tear is wear and tear that exceeds the standards stated in your lease agreement. In many leases, excessive-wear-and-tear standards are defined in specific terms. Any standards must be reasonable. Just like excess mileage, excessive wear and tear will decrease the value of the vehicle, whether it is purchased or leased. Examples of excessive wear and tear. The residual value in your lease assumes that your vehicle is returned in a certain condition. You should be aware of the lessor�s wear-and-tear standards and follow them if you want to return the vehicle at scheduled lease termination without an excessive-wear-and-tear charge. Examples of excessive wear and tear include Broken or missing parts Dented or damaged body panels or trim Cuts, tears, burns, or permanent stains in the fabric or carpet Excessively worn tires Cracked or broken glass Poor-quality repairs.	Effect of excessive wear and tear. The condition of the vehicle is a primary determinant of its resale value. The more wear and damage, the lower the vehicle�s trade-in or resale value. If you purchase the vehicle and do not maintain it according to the manufacturer�s recommendations or do not repair any damage that occurs, the value of the vehicle may be lower. When you purchase a vehicle, the creditor does not take the risk of the end-of-term value of the vehicle.
Maintenance requirements. Most lessors require the vehicle to be maintained according to the manufacturer�s recommendations. This requirement does not mean that the vehicle has to be serviced by the manufacturer�s franchise dealerships. However, you should be prepared to document that the required service was provided by an auto service professional. If you can�t show that the vehicle was properly maintained, you may be charged for excessive wear resulting from the lack of proper maintenance or for the cost of performing past-due service. Charges that the lessor assesses for returning the vehicle to the condition stated in your lease may be limited by state law to either actual repair costs or reasonable estimates of the costs of repairing the damage or excessive wear.	Maintenance requirements. Although creditors may legally require you to properly maintain the vehicle and keep it in good condition and repair, there is no charge for excessive wear and tear at the end of the term because the vehicle is not being returned to the creditor. You will be affected by the reduced value only when you trade or sell the vehicle.

Leasing

Buying

Most leases limit the amount of wear to the vehicle. You will likely have to pay extra charges if you exceed those limits, if you return the vehicle.

There are no limits or charges for excessive wear to the vehicle, but excessive wear will lower the vehicle�s trade-in or resale value.

Excessive-wear-and-tear standards. Excessive wear and tear is wear and tear that exceeds the standards stated in your lease agreement. In many leases, excessive-wear-and-tear standards are defined in specific terms. Any standards must be reasonable. Just like excess mileage, excessive wear and tear will decrease the value of the vehicle, whether it is purchased or leased.

Examples of excessive wear and tear. The residual value in your lease assumes that your vehicle is returned in a certain condition. You should be aware of the lessor�s wear-and-tear standards and follow them if you want to return the vehicle at scheduled lease termination without an excessive-wear-and-tear charge. Examples of excessive wear and tear include

Broken or missing parts
Dented or damaged body panels or trim
Cuts, tears, burns, or permanent stains in the fabric or carpet
Excessively worn tires
Cracked or broken glass
Poor-quality repairs.

Effect of excessive wear and tear. The condition of the vehicle is a primary determinant of its resale value. The more wear and damage, the lower the vehicle�s trade-in or resale value. If you purchase the vehicle and do not maintain it according to the manufacturer�s recommendations or do not repair any damage that occurs, the value of the vehicle may be lower.

When you purchase a vehicle, the creditor does not take the risk of the end-of-term value of the vehicle.

Maintenance requirements. Most lessors require the vehicle to be maintained according to the manufacturer�s recommendations. This requirement does not mean that the vehicle has to be serviced by the manufacturer�s franchise dealerships. However, you should be prepared to document that the required service was provided by an auto service professional. If you can�t show that the vehicle was properly maintained, you may be charged for excessive wear resulting from the lack of proper maintenance or for the cost of performing past-due service. Charges that the lessor assesses for returning the vehicle to the condition stated in your lease may be limited by state law to either actual repair costs or reasonable estimates of the costs of repairing the damage or excessive wear.

Maintenance requirements. Although creditors may legally require you to properly maintain the vehicle and keep it in good condition and repair, there is no charge for excessive wear and tear at the end of the term because the vehicle is not being returned to the creditor. You will be affected by the reduced value only when you trade or sell the vehicle.

Next: End of term

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Last update: May 5, 2003