Disclosures Required Under CLA and Regulation M

When dealers and consumers discuss a potential lease, dealers are required by law to disclose certain factors. Disclosures include a description of the vehicle, the amount due at signing or delivery, the payment schedule, and other charges payable by the leasee. These charges need to be itemized. Dealers need to disclose the total dollar amount of the payments. Also the dealer needs to reveal the leasee’s responsibility for compensating the owner for the car’s depreciation. The payment calculation must disclose the following figures and explain how they were determined: gross capitalized cost, capitalized cost reduction, adjusted capitalized cost.

In addition, dealers need to explain the rules governing termination and the formula used in calculating the penalties. Leasees need to be warned that early termination may result in a penalty of several thousand dollars, the earlier the termination, the larger the penalty. Excessive wear and tear needs to be defined, along with all other possible additional fees. Liability, the right of the leasee to get an independent appraisal of damage and the vehicle’s end value need to be explained. Responsibility for insuring the vehicle and for maintaining it need to be explained. Purchase options need to be spelled out as well.

Consumers need to know Regulation M does not cover all elements involved in the lease design. For example, it does not make clear that the leasee has the right to a written explanation of termination fees. Nor does Regulation M govern the fact that taxation can change over time. Tax rates may change and thus affect the costs leasees incur.

Inside Disclosures Required Under CLA and Regulation M