Car rental system ending with ownership

Car rental system ending with ownership

The lease-to-own system for cars is one of the most common contractual formulas on the market, but many disputes arise due to clauses signed without realizing their legal effects. 

The contract is not limited to determining the value of installments and the repayment period, but rather includes obligations and rights that may directly affect the ownership of the vehicle and the responsibilities of both parties. 

Therefore, being familiar with the most important provisions of this system before signing is a necessary step to protect your rights and avoid any unexpected obligations in the future.

What is the lease-to-own system?

It is a car rental contract with a price agreed upon between the two parties, provided that ownership of the car is transferred to the renter after all installments are paid in accordance with the terms and conditions specified in the contract.

The contract is subject to the provisions of the Financial Lease Law and its executive regulations, which regulate the relationship between the lessor (whether a company or a bank) and the lessee, and specify the terms and procedures of the contract, how to pay installments, etc.

What are the terms of rent ending with ownership?

The terms of the contract vary depending on the company providing the service and the terms agreed upon between the two parties in the contract.

The financial lease system specified the basic conditions in the lease contract ending with ownership, which are:

• The contract must be in writing or electronic.
• Having a valid driver’s license for the tenant.
• The lessor must be a joint stock company or a bank licensed to practice financial leasing activity.
• The vehicle must be owned by the lessor. 
• The contract must be registered in the contract register for financial leases.
• The contract must include the following data:
  • Personal data of the landlord and tenant.
  • The vehicle to be rented and its specifications.
  • Vehicle condition at the time of contract.
  • Agreed fare.
  • Fare payment dates and duration.
  • Contract duration and terms.

What is the difference between a lease-to-own system and an installment sale?

What is the difference between a lease-to-own system and an installment sale?

The difference between a rental system ending with car ownership and installment sales lies in the type of contract and car ownership. 

Contract type

The contract concluded in accordance with the leasing system ending with ownership by the Monetary Agency is considered a lease contract, and both parties are called the lessor and the lessee, and is subject to the provisions of the financial leasing system.

While an installment sale is a car sale contract between the seller and the buyer and is subject to the terms of the sale contract.

Car ownership

In the lease-to-own car system, the vehicle is owned by the lessor, who bears the costs of maintenance, periodic inspection, and insurance, and has the right to recover the vehicle if the lessee fails to pay the rent amount. 

Ownership of the car is transferred to the renter when the agreed amount is completed and the period specified in the contract expires.

In an installment sale contract, ownership of the car is transferred immediately after signing the contract with the buyer, and he is obligated to pay the installments on the dates specified in the contract.

 If the buyer stops paying the car installments, the seller has the right to resort to the competent court and demand payment.

What are the basic terms in the lease-to-own form?

• Basic contract party data.
• Contract details.
• Financial obligations.
• Guarantees.
• Conclusion and enforcement of the contract.
• Contract duration.
• Promise of ownership.
• The lessor delivers the vehicle to the lessee.
• Provisions for making rental payments.
• Late payment provisions.
• Provisions for transferring vehicle ownership.
• Pledges and declarations of the parties.
• Vehicle insurance.
• Vehicle maintenance.
• Termination of contract.
• Notifications.

What are the obligations of the lessor and lessee in a lease-to-own car contract?

What are the obligations of the lessor and lessee in a lease-to-own car contract?

Lessor obligations

• Delivering the vehicle to the tenant and enabling him to use it.
• Commits to performing basic vehicle maintenance.
• The lessor bears responsibility for the destruction of the vehicle if it was caused by him or by force majeure.
• The lessor is obligated to pay the vehicle insurance amount.

Tenant obligations

• The tenant is obligated to make the agreed fare payments on the dates specified in the contract.
• Using the rented vehicle for the purposes agreed upon in the contract.
• Notifying the lessor of any defect in the vehicle or a defect that prevents him from using it, such as the loss of the vehicle key, its breakdown, or its detention by the competent authorities.
•  Do not make any modification or change to the vehicle without the lessor’s approval.
• Compensation for the lessor in the event of the vehicle’s destruction if he was the one who caused it.
• The renter is responsible for damages resulting from his use of the vehicle.

What are my rights to a car rental that ends with ownership?

•  The lessee has the right to specify the descriptions of the vehicle to be rented before concluding the contract.
• The tenant has the right to assign the contract to another tenant with the landlord’s consent.
• The lessee has the right to own the vehicle after making the agreed-upon payments with the lessor, even if the contract period has not expired.
• The tenant has the right to recover the value of the payments he made upon termination of the contract.

Don’t leave any item unfathomable!

With the office of lawyer Abdul Majeed Al Rashid, you can review all the details of the car lease-to-own contract and get immediate advice from a lawyer who is skilled in contracts.

How do I buy a rental car that ends with ownership?

You can go to any company that provides car sales services with a promise of ownership, or go to a bank and inquire about the contract, the type of vehicle required, and its specifications.

The terms and procedures related to the contract must be read carefully and asked about clearly, especially the insurance clause, penalty clause, default, and termination of the contract. 

Do I have the right to return the vehicle that has expired?

The lessee has the right to return the vehicle during the lease period, provided that the lessor agrees to this.

What are the cases of termination of a lease agreement that ends with ownership? 

Articles 21 and 22 of the Financial Leasing Law stipulate the cases of termination of the contract, which are:

• The tenant fails to make the payments due within the dates specified in the contract.
•  Total destruction of the rented vehicle.
• If the vehicle is partially destroyed and the lessee is unable to use it because the lessor has not repaired or replaced it for him.
• A decision has been issued by a competent authority prohibiting the tenant from using the vehicle for a reason unrelated to it.

Understanding the terms of the lease-to-own car system gives you control over your legal rights and avoids future disputes. 

Do not leave any item signed without full scrutiny and accurate understanding of your responsibilities and rights.Contact the law office of Abdul Majeed Al Rashid.