Wisconsin Consumer Act: Motor Vehicle Leases

​​​​​The Leasing Option

Leasing is a way to obtain the use of a motor vehicle without purchasing it. Your rights and responsibilities concerning using the vehicle and making payments are disclosed in the lease agreement. A lease agreement is complex, so be sure you understand the agreement before you sign it. Most lease terms are negotiable. Understanding the terms and how they relate to your own needs may help you negotiate a lease that is right for you. Upon your request, a dealer must provide a blank sample of its lease form to you for your review.


  • Gross capitalized cost - the amount agreed upon by the lessor and the lessee as the beginning value of the vehicle, including taxes, insurance, service agreements, and any outstanding prior credit or lease balance.

  • Capitalized cost reduction - the total amount of any rebate, net trade-in allowance, and cash payment made at the beginning of the lease (similar to a down payment).

  • Lessee - a person that leases a vehicle for his or her use (i.e., the consumer/customer).

  • Lessor - a company in the business of leasing vehicles to consumers.

  • Rent charge - the charge the consumer pays for the right to make payments over time (similar to interest).

  • Residual value - the value of the leased vehicle at the end of the lease term.

How are the monthly payments determined on a lease?

First, subtract the capitalized cost reduction from the gross capitalized cost. The difference between that number and the residual value is the depreciation that will occur during the lease term. Add the rent charges to the depreciation amount to determine the amount of all payments. Divide the total of payments by the number of months in the lease to determine the monthly payment. Let’s look at an example for a car with a capitalized cost of $20,000 on a 24-month lease:

​​Gross Capitalized Cost
​Capitalized Cost Reduction​
​     500
​Adjusted Capitalized Cost
​Residual Value
​  8,500
​Rent Charges
​Total of Payments
Monthly Payment ($11,500 / 24 months)

Does the dealer have to tell me how the gross capitalized cost is determined?

Yes, lease agreements will contain a notice that informs customers of the right to receive a separate written itemization of the gross capitalized cost. If you request one, the dealer should provide the itemization before you sign the lease agreement.

What other payments must I pay besides the monthly payments?

  • At the beginning of the lease, you may have to pay a refundable security deposit; an acquisition fee; license, registration, and title fees; a capitalized cost reduction (similar to a down payment); and taxes.

  • During the lease, you will have to pay insurance premiums; ongoing maintenance costs; and sales tax on the monthly payments. If you end the lease early, you may have to pay substantial early termination charges. If applicable, you will also be responsible for any late payment fees and traffic tickets.

  • At the end of the lease, if you do not purchase the vehicle, you may have to pay a disposition fee and charges for excess wear and excess mileage.

The end of my lease is coming and I’ve decided I want to purchase the car. I don’t have a purchase option in my lease; will they sell me the car anyway?

Maybe. Since you didn’t negotiate a purchase option into your lease, the lessor isn’t under any obligation to sell you the car. Keep in mind that if you decide to buy, and the lessor agrees, it will be a new transaction. You will have to renegotiate the price and sign a new contract.

What is GAP?

If your leased vehicle is stolen or totaled in an accident, you are still obligated to pay the balance of your lease. The amount you receive from your auto insurance claim may not be enough to pay off your lease. The difference between the insurance proceeds and the amount owed on the lease is called the GAP amount. Your lease agreement will state whether you are liable for the GAP amount. The dealer may offer to sell you "GAP protection" which acts like insurance and will pay the GAP amount for you. A dealer cannot require you to purchase GAP protection.

Will I have to pay for repairs on the car while I am leasing it?

Usually, you are responsible for repairs and maintenance of the vehicle. The lessor must disclose this to you in writing when you first lease the vehicle. They must also tell you if the standard manufacturer’s warranty is available or if they provide any warranties on the vehicle. Because the warranty might not last as long as the lease, many lessors also sell extended service plans. Some of these are comprehensive, covering everything from maintenance to towing, while others only cover​ the major systems. Read the warranty carefully to make sure it provides the type of coverage you desire.

I leased a brand-new car yesterday and now I don’t think I can afford it. The salesperson won’t let me out of it, but don’t I have three days to cancel?

Probably not. The three-day right-to-cancel law applies to transactions that took place and were signed, away from the merchant’s regular place of business. For example, if you bought encyclopedias from someone who came to your door, you would have three days to cancel. But if you went to a store and purchased them there, the three-day right​ to cancel wouldn’t apply.

Who regulates leasing activity?

In Wisconsin, the Department of Financial Institutions and the Department of Transportation regulate lease practices. These Departments make sure dealerships abide by the laws that govern lease transactions.

If you have a question or concern about a company’s leasing practices, call, or write us at:​

Contact Us

Phone:  (608) 264-7969
Toll-Free:  (800) 452-3328 (in Wisconsin)
Fax:  (608) 264-7968
​​​E-Mail:  ConsumerAct@dfi.wisconsin.gov
Mailing Address:
Wisconsin Department of Financial Institutions
Bureau of Consumer Affairs
PO Box 8041
Madison, WI 53708-8041
Physical Address:
Wisconsin Department of Financial Institutions
Bureau of Consumer Affairs
4822 Madison Yards Way, North Tower
Madison, WI 53705​​