Spelling: les·see
What Is a Lessee?
A lessee is the person or party who leases a vehicle under a legal lease agreement. In car leasing, the lessee is the driver who takes possession of the vehicle for a fixed term in exchange for monthly payments.
The lessee does not own the vehicle but agrees to follow specific usage terms until the lease ends.
Lessee Meaning in Car Leasing
In a car lease, the lessee is responsible for:
- Making regular monthly payments
- Maintaining the vehicle according to the lease terms
- Staying within mileage limits
- Returning or buying out the vehicle at lease-end
The lessee enters into a contract with the lessor (usually a bank, credit union, or the automaker’s financing company) and agrees to conditions like insurance coverage, wear-and-tear standards, and fees for early termination or overages.
Most lease agreements are written in the lessee’s name and require a credit approval process before signing.
How the Role of the Lessee Works
Here’s what the lessee’s responsibilities typically include:
- Monthly lease payments based on depreciation, interest, and fees
- Maintaining the vehicle in good condition, including oil changes, tire rotations, and damage repairs
- Carrying full insurance coverage, often with minimums required by the lessor
- Monitoring mileage, which is usually limited to 10,000–15,000 miles per year
- Returning or buying the car when the lease ends
The lessee also has the option, if included in the contract, to purchase the car by paying the residual value and any applicable taxes or fees.
Pro tip: If you’re the lessee and your vehicle’s market value exceeds your lease payoff amount, you may have positive equity that you can use toward a new vehicle or keep as profit.
Lessee in Car Leasing Agreements
The lessee’s name, contact information, and responsibilities are all detailed in the lease agreement. This legal document outlines:
- Start and end dates of the lease
- Monthly payment terms and due dates
- Mileage limits and overage charges
- Buyout option details
- Return conditions, such as wear standards and fees
If multiple people will be driving the vehicle, the contract may list one primary lessee and allow for authorized secondary drivers, subject to approval.
In some states, lessees are also responsible for annual vehicle registration and property tax, depending on local laws.
Lessee vs. Lessor
It’s important to understand the difference between these two roles:
- Lessee: You, the person leasing and driving the car. You’re responsible for making monthly payments, maintaining the vehicle, and following the terms outlined in the lease.
- Lessor: The company or financial institution that owns the vehicle and writes the lease agreement. This could be a lender like Toyota Financial Services, Ford Credit, or a third-party leasing bank.
While the lessee has physical possession and full usage of the car, the lessor retains legal ownership until the vehicle is either returned or purchased at lease-end.
Example 1:
You lease a Honda CR-V from a dealership, but the lease is financed through Honda Financial Services.
- You are the lessee, you drive the car, pay $389 per month, and agree to a 36-month term.
- Honda Financial Services is the lessor, they own the car and set the residual value and mileage limits.
At lease-end, you choose to return the car and walk away. The lessor takes the vehicle back and may resell it.
Example 2:
You lease a BMW from a local dealership, but the lease is actually underwritten by a third-party bank.
- You (lessee) are responsible for insurance, regular maintenance, and keeping the car under 36,000 miles.
- The lessor (bank) has the right to charge you fees for overages or damage, and they’ll own the title until you decide to buy it or return it.
If the vehicle’s market value is higher than your buyout amount, you might choose to purchase it and keep the equity. That transaction would shift ownership from the lessor to you, the former lessee.
Related Terms in Car Leasing
- Prev Term: lease-end financing
- Next Term: lessor
- Related Terms: lease agreement, residual value, lease buyout, money factor