Leasing (lease with option to purchase) or long-term rental

Verified 15 October 2020 - Directorate for Legal and Administrative Information (Prime Minister)

Rental with purchase option (LOA), also called leasing, rental with promise of sale or leasing, must not be confused with long-term leasing (LLD). In fact, both formulas allow you to dispose of a good (often a car) without buying it, by paying rents monthly. But the LOA is a credit agreement that offers the possibility to purchase the property at the end of the lease, while the LLD is a simple lease with obligation of restitution.

LOA

Leasing with an option to purchase (LOA), also known as leasing, rental with promise of sale or leasing, is a type of consumer credit. It is intended for the purchase (temporary or not) of a car or any other property.

You can use it if you are not sure to keep the property for a long time (for several years). You will only be a tenant for a fixed period (usually from 24 to 72 months).

A bank or credit institution will purchase the property on your behalf and own it. You agree to pay him rent each month during this period and to use the property according to the conditions set out in the contract. In the event of a payment incident, the owner can take back the property.

At the end of the agreed period of use, you can purchase the property and acquire it permanently, or return it to the owner.

Proposal for a contract

Leasing can be offered by a commercial brand. The seller must then inform you that this payment method is indeed a type of credit. Your leasing will be managed by a bank or credit institution partner of the seller who will own the property. This is the most common case.

Alternatively, leasing can be offered directly by a bank or credit institution.

In all cases, the bank or credit institution is free to grant you the leasing according to its own conditions, notably related to your financial capacities. The bank or institution may consult the bank files to check your situation.

Preliminary information

The contract must contain the following information:

  • Lender, Borrower, and bonds, if they exist
  • Description of the goods concerned
  • Cash purchase price of the leased property
  • Duration of the rental operation (usually between 2 and 5 years)
  • Remaining amount to be paid in case of purchase at the end of the rental
  • Amount of rents and their number
  • Warning of the consequences of a default by the borrower
  • Existence of a withdrawal period
  • Address of the Authority for Prudential Control and Resolution (ACPR) and that of the Departmental Directorate for the Protection of Populations (Repression of Fraud) competent in the event of a dispute

However, the overall effective rate It does not have to be specified.

FYI  

if the contract so provides, the purchase can be made during the lease and not at the end.

If you accept the offer and sign the credit agreement, you have a withdrawal period after signing.

You have 14 calendar days from the signature of the contract to carry out this procedure with the lending institution. You can use the form provided with your credit agreement or mail template:

Withdrawal of consumer credit

You must send your request by registered letter with acknowledgement of receipt.

The lender can ask you for a security deposit, corresponding to a fixed sum or a percentage of the value of the rented product.

At the end of the lease, if you do not wish to acquire the property, the security deposit is returned to you.

If you decide to purchase the property, the security deposit is deducted from the price remaining to be paid.

Please note

the security deposit does not yield interest.

The amount and the number of rents you have to pay are foreseen as soon as the contract is signed.

Some contracts have a 1er rent plus. Unlike the security deposit, this surcharge is not refunded to you if you do not purchase the property.

If you are in default of rent, 2 cases may arise.

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The lender wants to terminate the contract

You must then return the vehicle, pay the rents due and unpaid as well as an additional compensation based on the value of the vehicle.

The lender does not want to terminate the contract

Without debt deferral

You can keep the vehicle. The lender can ask you for compensation equal to 8% of the rents due and unpaid.

With debt carry-over

You can keep the vehicle. The lender can ask you for compensation equal to 4% of the deferred rents.

The costs of maintaining the property remain at your expense, as a tenant.

You must keep the product in good working order for the duration of the rental.

In case of hidden defectHowever, it is up to you to take the steps to have the vehicle repaired.

General case

The leasing contract provides for whether you must insure the property or not.

Car

If you take a car by leasing, leasing or rental with option to purchase, you must ensure it at least with the civil liability guarantee.

The driver of the car must be able to prove, in the event of a roadside check, that the vehicle is insured.

This warranty does not cover damage to the vehicle or injury to the driver.

It may therefore be useful, in order to avoid incurring significant costs in the event of a disaster, to subscribe to additional guarantees.

You can also take out a specific leasing insurance, which makes it possible to cover, in case of destruction or theft, the difference between the market value and the new value of the vehicle.

Your lease ends at the end of a lease period defined in the contract, and generally between 24 and 72 months. At the end of this period, your credit ends and you no longer have to pay rent.

You can then purchase the property or return it to the owner establishment. Your choice between the 2 possibilities is free. The seller cannot condition the acquisition of the lease to a mandatory purchase.

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You want to buy the property

This possibility is also called call option. You become the real owner of the property.

You'll have to pay the difference

  • enter the value of the goods as indicated in the contract
  • and the rents already paid and the security deposit.

The value of the property as stated in the contract is higher than its market price because it takes into account financial interests.

In any event, the final amount to be paid for the purchase of the goods is fixed from the outset and is indicated in the initial contract.

For example, if the property is worth €10,000 on the market, while its value indicated in the contract is €13,000, and which you have already paid €3,000 security deposit and paid €9,000 of rents, you will still have to pay €1000, i.e €13,000 - (€3,000 + €9,000).

FYI  

carte grise for a car, if the change it.

You don't want to buy the property

You must return the property to the property owner. You will then collect your security deposit. You don't have to pay anything.

Mediation or conciliation

In case of a persistent dispute (dispute on the amount of rent...), you can ask a third party to intervene. These may be:

Please note

you can find legal sources regarding unfair lease terms on the unfair terms committee website.

Seizure of justice

If mediation or conciliation has failed, you can go to court.

You can also ask for damages for the damage suffered. For example, if you feel you have overpaid rent.

The competent judge shall be the protection litigation judge.

LLD

Long-term leasing (LLD) is intended for the temporary acquisition of a car or any other property.

You can use it if you don't want to own the property. You will only be a tenant for a fixed period (usually 12 to 60 months).

It is a specialist business that will buy the property and make it available to you. You agree to pay him rent each month during this period and to use the property according to the conditions set out in the contract. In the event of a payment incident, the owner can take back the property.

At the end of the agreed period of use, you must return the property to the owner. There's no way to buy it.

The LLD is offered by a specialist business. The renter must provide you with a written proposal that includes the conditions of the rental:

  • Contact details of the landlord, tenant and bonds, if they exist
  • Description of the goods concerned
  • Cash purchase price of the leased property
  • Duration of the rental operation (usually between 1 and 5 years)
  • Mileage allowed over the duration of the contract (if it is a car)
  • Amount and number of rents over the duration of the contract
  • Amount of penalties for exceeding the authorized mileage
  • Amount of penalties in case of late payment or non-payment of rent
  • Warning of the consequences of a default by the borrower

The renter can ask you for a security deposit, corresponding to a fixed sum or a percentage of the value of the rented product.

The contract states whether or not the security deposit must be returned to you at the end of the rental.

Please note

the security deposit does not yield interest.

The amount and the number of rents you have to pay are foreseen as soon as the contract is signed.

Some contracts have a 1er rent plus.

If you are in default of rent, the renter can terminate the rental and request the recovery of the property, the payment of the rents due and penalties.

The costs of maintaining the property remain at your expense, as a tenant.

You must keep the product in good working order for the duration of the rental.

In case of hidden defect, it is up to you to make the steps to have the vehicle repaired, but at the expense of the renter.

If the property is subject to an insurance obligation, as is the case for cars, you must insure it as if you were the owner. In the event of an accident, you will receive the insurance premium (the repair costs will be borne by you). The renter can offer you insurance, but you are free to insure the property with the insurer of your choice.

If the property is not subject to an insurance obligation, you are free to insure it or not, unless the contract requires it.

The LLD ends at the end of the lease period defined in the contract, and generally between 12 and 60 months. At the end of this period, you no longer have to pay rent and you have to return the property to the owner establishment. But the renter can charge you a fee if you have exceeded the mileage stipulated in the contract or if you have damaged the property. The method of calculating these fees and penalties must be defined in the contract.

Mediation or conciliation

In case of a persistent dispute (dispute on the amount of rent...), you can ask a third party to intervene. These may be:

Please note

you can find legal sources regarding unfair lease terms on the unfair terms committee website.

Seizure of justice

If mediation or conciliation has failed, you can go to court.

You can also ask for damages for the damage suffered. For example, if you feel you have overpaid rent.

The competent judge shall be the protection litigation judge.

FAQ