LOA: what you need to know
Posted on May 29, 2017 by Marion
Many consumers use Lease with Purchase Option or LOA to purchase a vehicle.
The principles of the LOA
The future owner rents a car, used or new, for two to five years. At the end of the rental contract, he has the option of purchasing the vehicle according to a price agreed in the contract. It only pays the residual value with no interest rate. It does not pay any personal contribution as in the classic loan.
The elements of LOA
In the rental agreement, several elements must appear by law. This includes the date, the duration of the offer, the identity of the lessor and the lessee. The object of the contract must be mentioned, the price of the vehicle taking into account its value and the terms of payment.
Other information is mandatory. Namely the rental costs, the duration, the amount of the deposit. We must not forget the amount of rent.
Since the purchase is an option, the surrender value must be entered at the end of the contract. This is called the residual value. Both parties must agree on the total cost of the operation.
The attractive points of the LOA
The costs of the gray card (in the name of the lessor), repairs and insurance at all risk are in principle the responsibility of the lessee.
Nowadays, however, the lessor agrees to take out insurance and maintenance of the vehicle. This commercial policy aims above all to attract customers.
The 10-day withdrawal period is also valid for the LOA. It is applicable immediately after signing the contract.
The tenant becomes the owner after having paid the residual value of the vehicle
The tenant can acquire the car before the end of the contract and at the end of the contract. In the event of non-redemption, the tenant may recover the security deposit if the conditions set at the start are met.
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