Leasing goods may make them more accessible than purchasing them. For example, your monthly payments are usually lower than if you finance your purchase through an extended payment plan.

The real cost of the lease

Take the time to evaluate the full cost, when all is said and done, of any goods you are thinking of leasing. Here's an example: a car would cost you $24,000 (taxes included) to purchase. To lease that vehicle, it would cost you $13,000 in total monthly payments over 4 years, and its residual value (the price to pay if you purchased the vehicle at the end of the lease) would be $10,000 plus taxes. Is leasing this vehicle to your advantage?

You should also ask yourself, when considering the total cost of the lease and your other financial obligations, whether you can afford this expense.

The What Is a Lease Contract with Purchase Option page provides more information on this subject.

Evaluating your ability to pay

The merchant who leases you the goods, or the person to whom the contract is assigned (if approved by the merchant), is required to evaluate your ability to pay. To do so, he or she must consider your income, your monthly housing expenses, your monthly payments in connection with other credit contracts, etc. Note that banks and financial service cooperatives fulfill take care of this evaluation requirement.

Even if a merchant agrees to lease you an item, it would be wise for you to evaluate your own ability to fulfill your obligations, such as making your payments. To do so, consider the total amount of the payments in connection with the lease contract as well as your other financial obligations.

Information about a long-term lease with purchase option must appear in a written contract.

Mandatory information

The contract must contain:

• the date and place of the contract's signature;
• your first name, last name and address;
• the merchant's name and address;
• the amount of the security deposit, if applicable;
• the amount of the monthly instalments;
• the details about the purchase option, namely the amount you will have to pay to purchase the item or how to calculate this amount;
• any other conditions to be fulfilled;
• both signatures (yours and the merchant's).

Mandatory clauses

The contract must also include:

• the clause provided for under section 45.1 of the Regulation respecting the application of the Consumer Protection Act, which informs you of your rights and obligations as well those of the merchant.
• the clause provided for under section 43 of the Regulation respecting the application of the Consumer Protection Act, if the contract contains a clause of forfeiture of benefit of the term. This clause allows the merchant to ask you pay the total amount of any late payments. If you have not made that payment after 30 days, the merchant will demand payment of all instalments provided for in the contract.

Signatures

The merchant must sign the contract first, then allow you to read it, and then have you sign it. Lastly, the merchant is required to give you a copy of the contract signed by both parties.

When you acquire an item through a long-term lease, certain payment terms apply.

Down payment

It is wiser not to leave a down payment (or a "deposit") as long as you have not firmly decided to acquire an item through a long-term lease.

What happens if you give the merchant a down payment and later decide not to lease the item?

As long as you have not signed a lease contract with purchase option that complies with the law, you have not entered into any commitments with the merchant. You may simply be given an offer. The merchant should reimburse this down payment.

If you signed a contract, the merchant could refuse to give you your money back, as you entered into a commitment to lease the item by making a down payment. The merchant could even demand that the contract be honoured or claim damages, meaning a sum of money to compensate for any losses caused by the cancellation.

Instalments

The merchant cannot ask you to pay more than 2 instalments in advance.

The periodic instalments paid over the leasing period must be equal amounts. Only the final payment can be for a lesser amount. The instalments must also be spread over essentially equal periods (usually once a month).

Security deposit

The merchant may ask you for a security deposit at the time of the contract's signature. This amount must be reimbursed to you at the end of the contract.

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The Office recommends that you refrain from signing any documents until you have firmly decided to acquire an item through a long-term lease. Contrary to popular belief, you do not have 10 days to cancel if you change your mind. You can find out about the contract cancellation terms.