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Lease of Automobile with Option to Purchase

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Lease of Automobile with Option to Purchase at the End of the Term for a Price of $1.00

This Lease Agreement is made this the day of , 20 between

(), hereafter referred to as Lessor, of

and () of

, hereafter referred to as Lessee. Lessor and Lessee hereby agree as follows:

1. Lessor hereby leases to the Lessee, for a term of months the following described Motor Vehicle (hereinafter called Vehicle):

Make

Model

Year

Color

Engine Size (Cubic Centimeters)

Engine Serial Number:

Vehicle Identification Number:

The term and rent shall commence on the day of , 20 and end on the day of , 20

2. Lessee will maintain, or cause to be maintained, the Vehicle in good working condition. Nothing in this Agreement shall require Lessor to provide or pay for, or cause to be provided or paid for, any gasoline, oil, antifreeze, washing or storage for the Vehicle.

3. Lessee will reimburse Lessor for the cost of any inspection of the Vehicle as required by laws of the state of

4. Lessee agrees to pay to Lessor at the sum of $ as rent, on the first day of each and every calendar month. The rent for the first and last month of the term, unless the term starts on the first day of the month and ends on the first day of the month, shall be apportioned on the basis which the number of days of the term in the month bears to the whole number of days in such month.

5. The Vehicle leased under this Agreement will be used and operated in a careful manner and Lessee will pay or cause to be paid any fines imposed by any governmental authority levied upon the Vehicle and/or its driver as the result of any act or omission during the term the Vehicle is leased under this Agreement.

6. Lessee will not use or allow the Vehicle to be used for any illegal purpose and will reimburse Lessor if the Vehicle is confiscated and for expenses incurred as a result of any confiscation or attempted confiscation by any governmental authority whatsoever, whenever such confiscation and expenses, or either, is caused by the illegal use of such Vehicle while the Vehicle is leased under this Agreement.

7. Lessee will keep and maintain the Vehicle in good running order and will see that it stays in good repair and is properly serviced at the expense of Lessee.

8. Lessee shall pay for all necessary repairs to the Vehicle

9. The Vehicle will be kept and maintained in a garage or other covered storage space except when in use.

10. Lessee will pay for, at his sole expense, all gasoline, oil, antifreeze, washing, and storage fees for the Vehicle leased under this Agreement.

11. Lessee will reimburse Lessor for the cost of indemnity insurance covering the Vehicle, including public liability and property damage insurance, issued by a responsible company or companies, protecting the interests of both Lessee and Lessor against liability for damage, personal injury or death caused by the Vehicle or the operation of the Vehicle to the extent of not less than $ per accident and not less than $ per person; and the sum of $ per accident against liability for damage to property caused by the operation of any Vehicle leased under this Agreement. Lessor further agrees to furnish to Leseer, prior to the use or operation of any such Vehicle, a certificate of such insurance.

12. Should any claim be made or any action be commenced against Lessor arising from any of the causes covered by the insurance referred to in Paragraph 11, Lessor will promptly notify Lessee.

13. In the event of the cancellation of any public liability and property damage insurance required under the terms of this Lease Agreement, the use by Lessee of the Vehicle shall cease until all such insurance so cancelled has been renewed or replaced.

14. Except as otherwise subsequently provided, upon the expiration of the term of this Lease Agreement or its earlier termination for any reason, the Vehicle shall be returned by Lessee to Lessor at .

15. If any default shall be made by Lessee in the payment when due, of any rent or other sum due under this Agreement, or in the performance of any other provision, or if Lessee is or becomes unable to pay her debts from her own means as they become due, or if any receiver or trustee of the business or of the property or assets of the Lessee shall be appointed by any court, or if the Lessee shall abandon the Vehicle, or if the Lessee shall otherwise, in any manner whatever, become unable to pay the rent specified here or to perform any of the provisions to be kept or performed by Lessee, then Lessor shall have the option, without notice to Lessee or demand for performance, to require Lessee to redeliver the Vehicle to Lessor at a location designated by Lessor at Lessee's expense.

16. Upon any such default, Lessor may terminate this Lease Agreement, in which event Lessee shall pay to Lessor the amount of rent that would have been paid to Lessor had there been no such default.

17. The foregoing remedies for default shall not be exclusive but shall be cumulative and in addition to all other remedies.

18. Lessor does not assume any liability for any acts or omissions of Lessee or of any of Lessee's agents, employees or drivers and Lessee specifically releases Lessor from all such liability and agrees to indemnify and hold Lessor harmless of and from any and all such liability.

19. Other than the Option to Purchase set forth in Paragraph 22 below, this is a Vehicle lease only, and the Lessee has acquired no right, title or interest in the Vehicle, except the right to use the same pursuant to the provisions of this Lease Agreement.

20. So long as the Lessee performs all of the terms and conditions of this Lease Agreement including payment of the rental, Lessee shall have the unrestricted lawful use of such Vehicle for any lawful purpose except the transportation of persons or property for hire.

21. Lessee will not assign or mortgage this Lease Agreement, or any interest in it, or permit the use of the Vehicle by any person other than Lessee or an adult member of her family or her agents or employees, nor sublet the Vehicle without the written consent of Lessor.

22. Option to Purchase: Lessor hereby grants to Lessee the option to purchase the Vehicle at the end of the term for the sum of $1.00. If Lessee desires to exercise the option to purchase, Lessee shall do so by giving Lessor written notice of that intent no less than days prior to the end of the term of this Lease.

23. Notwithstanding the foregoing, and anything herein to the contrary notwithstanding, any dispute under this Agreement shall be required to be resolved by binding arbitration of the parties hereto. If the parties cannot agree on an arbitrator, each party shall select one arbitrator and both arbitrators shall then select a third. The third arbitrator so selected shall arbitrate said dispute. The arbitration shall be governed by the rules of the American Arbitration Association then in force and effect.

24. This Lease Agreement represents the entire agreement between the parties and no provision may be waived or modified, except by an instrument in writing signed by both of the parties.

WITNESS our signatures the day and year first written above.

LESSOR

LESSEE

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What the Lease of Automobile with Option to Purchase Is

A Lease of Automobile with Option to Purchase is a contract combining a vehicle lease and a prearranged right for the lessee to buy the vehicle during or at the end of the lease term. It sets the lease term, monthly payments, option price or purchase formula, conditions for exercising the option, and responsibilities for maintenance, insurance, registration, and tax. The document allocates risk for title, liens, and early termination; it can incorporate electronic signatures and records where permitted by ESIGN and applicable state electronic signature law.

Why this Agreement Matters for Both Parties

The Lease with Option clarifies purchase intent, fixes or formulas the buyout price, and defines obligations during the lease. It reduces later disputes by documenting payment crediting, title handling, and option exercise mechanics, and it can improve execution speed when completed electronically under ESIGN and UETA.

Why this Agreement Matters for Both Parties

Who Typically Prepares and Signs This Document

Typical parties who prepare or sign a Lease of Automobile with Option to Purchase include dealers, leasing companies, and individual lessees.

  • Lessor (owner or dealer) — the party offering the lease and option; often a dealership or private owner.
  • Lessee (individual or business) — the party who leases the vehicle and may later exercise the purchase option.
  • Secured lender or guarantor — may need to sign or consent when the vehicle is subject to financing or lien.

In some transactions a broker, co-lessee, or authorized agent also signs; identify signatory authority before execution.

Core Elements to Include in a Professional Lease of Automobile with Option to Purchase

A comprehensive agreement addresses parties, vehicle specifics, financial terms, purchase option mechanics, default remedies, and post-exercise title transfer steps so both sides understand obligations and timing.

Parties

Full legal names and contact details for lessor, lessee, and any guarantor; identify business entities by registered name and state of formation.

Vehicle Description

Make, model, year, VIN, current odometer reading, and any equipment or warranties; include condition report or attach photos as an exhibit.

Lease Term

Start and end dates, monthly payment amount, due date each month, late fees, permitted mileage, and excess-mileage charge formula.

Option Price & Exercise

Specify fixed buyout price or a clear formula, how to deliver the exercise notice, the deadline to exercise, and whether option consideration is credited.

Payments & Consideration

Describe security deposit, allocation of payments toward purchase (if any), sales tax treatment, and who pays registration and DMV fees.

Default & Remedies

Define events of default, cure periods, repossession rights, acceleration, and how unpaid balances and insurance claims are handled.

Required Information and Key Fields to Capture

Vehicle VIN: Vehicle identification number
Lessee Name: Full legal name
Lessor Name: Full legal name
Option Price: Fixed amount or formula
Lease Dates: Start and end dates
Insurance Minimums: Required coverage limits

Step-by-Step: Completing the Lease of Automobile with Option to Purchase

Follow these steps sequentially to prepare, execute, and preserve a legally effective lease with purchase option.

  • 01
    Gather documents: Obtain title, VIN, prior service history, and proof of identity for all signers.
  • 02
    Draft terms: Enter lease payments, option price or formula, mileage limits, and default remedies explicitly.
  • 03
    Confirm obligations: Allocate tax, DMV, insurance, and maintenance responsibilities in writing.
  • 04
    Execute signatures: Sign, date, and notarize if required; retain copies with audit trail for electronic signatures.

How to Configure an Online Workflow for This Agreement

Set up a digital template that captures all required fields, enforces signer order, and preserves an audit trail for compliance.

Upload Document Add the lease PDF or DOCX to your eSignature platform.
Add Fields Place signature, initial, date, and text fields for VIN, prices, and dates.
Set Signer Order Require lessor then lessee, add guarantor as necessary.
Choose Authentication Select email, SMS code, or stronger ID verification for high-value deals.
Save Template Reuse the template for future leases to reduce errors and speed execution.

Where to Send and File the Executed Lease

After signing, distribute executed copies to all parties and take any required steps for title, registration, or financing.

  • To the Lessee: Deliver a fully executed copy and proof of insurance requirements.
  • To the Lessor: Retain original or signed electronic record and update internal lien records.
  • To Lender or Secured Party: Notify and provide executed documents if financing or lien exists.
  • State DMV: File title transfer or lien records as required after purchase exercise.

Technical and Format Requirements for Electronic Execution

Use a platform that preserves PDF or DOCX versions, generates an audit trail, and supports common integrations with business systems.

  • File Formats: PDF and DOCX support for consistent printing and archival.
  • Integrations: Connectors for Salesforce, NetSuite, Google Workspace, and Box streamline workflows.
  • Security: TLS in transit and AES-256 at rest for document protection.

Choose a solution that offers conditional fields, signer authentication options, and retention capability to meet legal and recordkeeping needs.

Key Dates and Time-Sensitive Actions to Track

Track these dates closely; missed deadlines can affect the ability to exercise the option or create tax and title complications.

Lease Effective Date:

Date lease obligations and payments begin.

Option Exercise Deadline:

Final date to notify lessor to purchase, as stated in the contract.

Monthly Payment Due Dates:

Regular due dates and grace periods for payments.

Title Transfer Timing:

File title transfer after purchase; state timing varies, often 10–30 days.

Insurance Proof Deadline:

Provide proof of required coverage upon execution and at renewals.

Common Mistakes to Avoid When Preparing the Lease

  • Vague option terms — failing to fix a price or provide an unambiguous formula leads to disputes at exercise time.
  • Incomplete vehicle description — omitting or misstating VIN, odometer, or equipment can invalidate title transfer steps.
  • Failure to address tax and registration — not assigning responsibility for sales tax and DMV fees creates liability gaps.
  • Ignoring authentication standards — weak signer verification or no audit trail can undermine enforceability for high-value transfers.

Penalties and Legal Risks of an Incorrect or Incomplete Agreement

Title Lien Risk: Buyer may receive vehicle with undisclosed lien
Tax Liability: Unpaid sales or use tax obligations
Invalid Option: Ambiguous exercise terms can void the option
Insurance Gaps: Liability exposure for uninsured damage
Repossession Costs: Fees and loss if default occurs
Regulatory Penalties: State DMV fines or failure-to-file consequences

eSignature Pricing and Feature Comparison for Lease Execution

Basic pricing and feature availability vary by vendor and plan; signNow is listed first in the comparison per platform data and supports plans suitable for document templates and bulk workflows.

signNow DocuSign Adobe Sign PandaDoc HelloSign
Starting Price $8/user/mo $15/user/mo $14/user/mo $19/user/mo $15/user/mo
Free Trial 7-day free trial Trial available Trial available Trial available Trial available
Bulk Send Yes (Business Premium) Yes Yes Yes Depends on plan
Audit Trail Yes Yes Yes Yes Yes
HIPAA Compliant Yes (BAA available) Varies by plan Varies by plan Varies by plan Varies by plan

Two Real-World Examples of Electronic Lease Execution

These customer examples illustrate common benefits when leases and options are managed as digital templates with audit trails and templates.

Martin Properties — Tim Martin

Tim Martin needed a repeatable process for fleet leases and buyouts

  • Implemented template-based leases
  • The firm processed and executed documents online with consistent compliance and faster turnaround, reducing administrative follow-up and missing signatures.

Fertility Centers of Illinois — John Butler

John Butler required flexible signature workflows across offices

  • Adopted reusable templates and role-based signing
  • The organization gained flexibility to collect signatures in required formats, maintain security, and integrate signed records with back-office systems.

Practical Tips for Accurate and Efficient Completion

Adopt these practices to reduce disputes, ensure enforceability, and speed processing for leases with purchase options.

Define the option precisely
State the exact buyout amount or an explicit formula, including any credits for lease payments, fees for excess mileage, and whether option consideration is refundable or applied to purchase price.
Document title and lien status
Confirm the vehicle has a clear title or disclose liens; outline who will obtain lien releases at purchase to avoid surprises at DMV processing.
Preserve audit trail
Use an eSignature platform that captures signer identity, timestamps, IP addresses, and document history to support enforceability under ESIGN and UETA.
Coordinate taxes and registration
Allocate sales tax, use tax, and registration fees in writing and reference applicable state rules to prevent later disputes and ensure accurate reporting.

Frequently Asked Questions and Practical Answers

Answers to common legal and execution questions for the Lease of Automobile with Option to Purchase, including e-signature and notarization concerns.


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