Back to Regulation M Introduction

New Federal "Lease Box"

The most striking change which consumers who have leased before will notice is that in every new lease agreement (or disclosure form) is the new "federal box" found at the top of the required list of segregated disclosures. The Association of Consumer Vehicle Lessors (ACVL), along with other leading trade associations, had suggested that the key payment items should be segregated into a federal box similar to the Regulation Z box for installment sales. The advantage for consumers is that the cost information is summarized in one place for easy comparison in a format that looks familiar.

Exhibit 1 Federal Lease Box

The first three sections of the lease box largely incorporate the suggestions made by the ACVL and other leasing trade associations1. The boxes disclose the timing and size of each payment due under the lease: Amount due at lease signing Monthly payments Other charges (including end of term charges) The last section of the lease box is the inclusion of the "Total of Payments." The total of payments is the sum of the Amount Due at Lease Signing, minus any refundable amounts like security deposits or reconditioning fees, the total amount of periodic payments (excluding those counted in the amount paid at lease signing) and the other charges due over the term. In essence, it is the sum of the first three boxes minus any refundable amounts, minus the payments made at lease signing which are counted in both the "Amount Due at Lease Signing" box and the "Monthly Payments" box. While not reflecting the time value2 of money differences between competing leases, this summation is a useful number to compare gross costs between leases of the same term that have different initial charges, monthly payments, disposition fees and other charges. Note: It does not provide a direct comparison of total costs for consumers purchasing the vehicle so it is not applicable to consumers trying to make total cost comparisons between leasing and buying. Other segregated disclosures In addition to the new lease box, the new Regulation M includes the requirement to segregate another large group of about 23 disclosure items immediately following the lease box. These disclosures will create a great deal of uniformity in most lease agreements since most lessors will put these disclosures at or near the top of the first page. (Relatively few lessors will use a disclosure form separate from the lease contract although they are permitted to do so.) The major sections of the remaining segregated disclosures are: Amount due at lease signing Payment calculation Early termination warning Excessive wear and use Purchase option at end of lease term Statement referencing non-segregated disclosures

1References in this article to the "industry recommendations" or "ACVL recommendations" refer to the joint recommendations of the ACVL, the American Financial Services Association, the Consumer Bankers Association, and the National Automobile Dealers Association. 2"Time Value" refers to a financial analysis in which payments to be made in the future are discounted to their "present value." This methodology allows transactions with different initial payments, monthly payments and end of term payments to be compared. The analysis requires a "discount rate" which is specific to the user representing the alternative cost or earning opportunities of the funds.