How to drive a good bargain when you lease a car
Rather than buy a car outright, many drivers opt for “lease to purchase” contracts; the advantages over a straight purchase include the ability to sign the contract without involving a sponsor, no down payment, no fees and many other benefits aimed at attracting new clients.
Lease purchase, also known as “financial leasing,” is a system whereby a bank or finance company purchases the car, and then rents it to you in return for monthly payments. At the end of the contract period, they will transfer the ownership of the vehicle to you, after a final payment.
The contract must include a schedule of payment instalments that separates the full price of leasing the vehicle from the cost of owning it. Occasionally, customers tend to focus on the final amount rather than checking that these two costs are separated.
If the contract is terminated during the lease period, the bank or finance company has the right to activate their insurance for compensation, if applicable, based on the schedule of instalments in the contract.
Early-bird payment may be available, when the customer wishes to pay all the outstanding instalments at once, thus effectively ending the contract. The bank or finance company has certain rights in this regard, including the right to be compensated for their investment cost up to the value of three months’ instalments.
Can the vehicle be repossessed by the bank or finance company? We have all heard of such cases, mainly because the customer has failed to pay instalments for three months. Nevertheless, repossession may take place only in a manner that protects the rights of both parties. Nor can it be done immediately; the bank or finance company may be required to follow certain steps, including sending notices to the customer, and involving the police if there is no response and the customer clearly knew about the notices but is simply trying to avoid the issue.
The vehicle remains the property of the bank or finance company until the final payment is made, so the customer must use it correctly, and may not sell or sub-lease it without a legal document that permits them to do so.
It is important that customers do not enter into a lease agreement without examining the vehicle carefully, and checking that the specifications conform exactly with what is in the contract.
The role of the Saudi Arabian Monetary Agency (SAMA) is to study and review financial leasing products, to verify their compliance with legal standards and procedures. Any complaint about a financial leasing contract may be submitted through the SAMA website.
• Dimah Talal Alsharif is a Saudi legal consultant, head of the health law department at the law firm of Majed Garoub and a member of the International Association of Lawyers. Twitter: @dimah_alsharif