Car lease contracts are all different in detail, but contain important common elements that should become familiar to you. In fact, you should pick up a blank agreement form from your dealer before you actually plan to lease. Seeing a contract for the first time as you're sitting under the hot lights in the salesman's office is not the ideal time to examine it.

Most auto lease agreements require you to maintain insurance coverage: bodily injury or death liability: $100,000 per person / $300,000 per occurrence, property damage liability: $50,000, comprehensive and collision for actual value with no more than $500 deductible. In Canada, $1,000,000 in liability insurance is required. While this may be more coverage than you might buy normally, it's always smart to have maximum protection in these times of expensive repairs and huge lawsuits.

Excessive Wear and Tear

Leasing contracts specify that you must return the car at lease-end with no more than "normal" wear and tear. Most new contracts do a pretty good job of spelling out exactly what "normal" means. Basically, it means you have to take reasonably good care of the car and keep it maintained.

It's interesting that this is the part of the leasing contract that is most responsible for "leasing phobia" with many first-time leasers, and causes some people to decide not to lease. These people have a tremendous unfounded fear that, when they return the car, the leasing company will examine it with a fine-tooth comb and penalize them thousands of dollars for minor dings and scrapes.

Of course, if you actually have significant damage, seriously worn tires, and deep scratches, you'll have to get them repaired before your return the car or pay after you return the car.

Leasing agreements specify the maximum average annual mileage you're allowed without paying a penalty. The most common mileage limit is 15,000 miles per year, although 12,000 miles is often used, and even 10,000 miles. Make sure that when you lease, you select the limit that best fits your driving needs because the penalty at lease-end for exceeding the limit can be expensive - typically in the range of $0.10-$0.25 per mile. For Canadians, the Kilometer Allowance is most often 24,000 km. Excessive Kilometre charges vary as in the US.

Terminating a lease contract early can be very costly, and should be avoided if at all possible. As stated before, this is the part of leasing that gets the most people in trouble.

Many people seem to think that because getting into a lease is so easy, that getting out must be easy too. Actually many lease agreements won't let you get out until you've leased for a certain amount of time, usually 12 months. After that time, there are provisions for terminating but it can be very expensive.

To summarize, if you think there's a possibility that you will not be able to complete your lease term agreement, just don't lease!

Destroyed or Lost Vehicle

Having your leased vehicle totally destroyed or stolen is a form of early termination and, unless you have gap protection, you are exposed to the same penalties and payments as described above. Gap protection, sometimes called gap insurance, covers any additional amount that you might owe after your insurance company pays off.

In many lease contracts, gap coverage is included for free, In others, it's included as an option for a small charge. In still others, there are no gap provisions at all, but may be available from an independent source.

Gap coverage is very important and is highly recommended. Read the fine print in your contract and ask your dealer to find out what protection you have in your particular situation.