Regulation M - What Disclosures Must Be Made?

• A description of the leased property.
• The total amount of money due at lease signing, itemized by the type of charge.
• Monthly payment information. This includes the number, amount and due dates for payments under the lease as well as the total of all monthly payments.
• Other Charges. This new addition requires disclosure of any additional charges such as a disposition fee or other lease-end liabilities which are not included in the monthly payment.
• Total of Payments. This provision requires the lessor to give the total of all amounts spent by the lessee, including, amounts due at lease signing, and other charges (in open-end leases, an additional disclosure regarding lease-end liability is required).
• Payment Calculation. This is a useful one! The lease or disclosure form must give a step-by-step mathematical explanation of how the monthly payment was derived.
• Early Termination. Regulation M will require a statement of the conditions under which the lessee may terminate early, the cost (or method of determining the cost) of early termination, and the penalty or other charge imposed for early termination. The new regulation also requires the lessor to give a warning to the effect that charges for early termination may be substantial and that the charges will be higher the earlier one elects to terminate.
• Maintenance Responsibilities. The lessor must indicate who is responsible for maintaining or servicing the leased vehicle (usually you!).
• Wear and Tear. If the manufacturer has a standard for wear and tear, it must be disclosed and it must be reasonable.
• Purchase Option. The lease must indicate whether you have the option to purchase at lease end and, if so, at what price.
• Fees Payable.
This includes the total amount payable for official fees, registration, certificate of title, license fees, or taxes.
• All other charges not included in the monthly payment. This includes fees payable at lease end (i.e. disposition fee, purchase option fee).
• Insurance Information. The lease form should indicate the types of insurance and coverage amounts provided by the lessor as well as those not provided by the lessor but required by the lessee.
• Warranties. The lease must disclose what warranties are available to the lessee under the lease.
• Liens, if any. The lease must disclose any assets (including the vehicle) against which the lessor is taking a lien.
• Penalty Information. The lease should disclose the amount or the formula for calculating the amount of any penalties for late payments or other defaults.
• Open-End Liability. If the lease is an open-ended lease, there are a host of disclosures regarding the right of appraisal and the calculation of and limitations on lease end liability. Since liability is calculated by subtracting the value of the vehicle realized on sale from the predicted residual value, Regulation M creates a presumption that any difference in the two which exceeds the sum of three monthly payments under the lease, is unreasonable. If, however, the difference is due to your excessive wear or use of the vehicle, you may be liable for the entire amount, even if it exceeds the three-payment limit.
• Renegotiations, Extensions and Assumptions. If you re-negotiate your lease or extend it beyond 6 months, the lessor must make the legally required disclosures.