Leasing in Switzerland
There is no definition of leasing in the law, which does not prevent this type of contract from being perfectly legal. Automobile leasing in Switzerland is subject to the federal Law on Consumer Credit (LCC): these are leasing contracts which relate to vehicles used for the private use of the lessee and which provide for an increase in leasing costs in the event of early termination of the contract (art. 1 paragraph 2 letter a LCC). It is therefore the leasing contract and its general conditions that will indicate whether the lessee benefits from the protection of the LCC or not. Note that leases of less than 500 francs and more than 80,000 francs also fall outside the scope of the LCC.
The “typical” leasing contract brings together three parties:
- The motorist, or the lessee
- The leasing company, or the financial institute
- The garage, or the vehicle supplier
The garage sells the car to the leasing company, which becomes the owner. During the entire lease term, the motorist does not own the leased car, he leases it to the leasing company. The motorist only has a right of use on the vehicle, together with obligations, such as for example, that of taking out full casco insurance and rigorously maintaining the leased automobile in a brand garage.
In most cases, at the start of the lease, the motorist pays a first deposit to the garage who hands over the vehicle to him. Then, the agreed rents will be due until the end of the lease. At the end of the contract, it is generally expected that the leased car will be returned to the supplier. If the amount of the residual price of the vehicle at the end of the lease is stated in the contract, the motorist can buy the car at the end of the leasing. Namely that the supplier of the vehicle retains complete freedom to decide on the sale of the car at the end of the leasing contract.
At the end of the contract, in the event that the motorist returns the leased car, the vehicle will be examined very carefully and any breach of contractual obligations will be translated into repair costs; the bill can be very high. The normal wear and tear of the vehicle has already been taken into account in the cost of the leasing. In case of doubt or disagreement as to the content of the report of the return of the leased vehicle, you can call in an independent automobile expert.
Protection of the lessee by the LCC
Hereinafter, only leasing contracts subject to the Consumer Credit Law will be examined. The LCC only partially applies to leasing contracts (see for details art. 8 LCC).
For formal requirements, article 11 LCC provides that the leasing contract must be concluded in writing and that the lessee receives a copy. It must also contain the following information:
- A description of the vehicle and its cash purchase price when conclusion into the leasing contract;
- The number and amount of payments as well as their due dates;
- The amount of a possible first contribution or a possible caution;
- A possible obligation of insurance and, if the choice of the insurer is not left to the motorist, the cost thereof;
- The overall effective annual interest rate; the latter must not exceed 15% (art. 14 LCC);
- The right and the deadline for revoking the car leasing contract (set out in Article 16 LCC, it is 14 days);
- A table, drawn up according to recognized principles, which shows, on the one part, the amount to be paid by the lessee, in addition to the rents already paid, in the event of early termination of the leasing contract, and on the other part of the residual price of the vehicle at the time of termination of the lease;
- The elements taken into account when examining the financial capacity to conclude a leasing contract (the budget and / or the assets, according to art. 29 para. 2 LCC).
Namely that the consent of the partner is not required to contract a leasing.
If an obligatory clause does not appear in the lease contract, the latter is void. The motorist must return the vehicle and pay the monthly payments due until it is returned. The loss in value of the leased vehicle is the responsibility of the leasing company (art 15 para. 4 LCC).
Examination of the financial situation of the lessee
According to article 29 LCC, the leasing company is required to examine the financial situation of the renter and ensure that the motorist is able to pay the monthly payments without touching his minimum subsistence level, or that he has assets that can ensure the payment of the monthly lease payments. The data which will have based the acceptance of the leasing must appear on the leasing contract or on a document annexed to the contract.
The lessor is required to actively seek the elements that will him to calculate this budget. He may require the consumer to provide him a salary certificate, an extract from the debt collection register, or other documents attesting to his solvency. If the lessor doubts the accuracy of the information provided by the consumer, he verifies its veracity by means of official or private documents (art. 31 LCC). In addition, he will take advantage of the information contained in the documents provided by the customer to the leasing company in order to establish an LCC budget that corresponds well to his financial situation.
The lessor must also notify the Credit and Information Center (ZEK) of the total amount due, the duration of the lease contract and the amount of monthly rents. Zek records data (for example late leasing payments) on people interested in leasing.
Right to revoke a leasing contract
The consumer has the right to revoke his leasing contract in writing within 14 days. These elements must be included in the contract. The time limit starts when the consumer has received a copy of the contract. The notice of revocation must be mailed no later than the 14th day. It is necessary to send such a notice by registered mail in order to have, if necessary, a means of proof of the interruption of the leasing contract.
Anticipated termination of the leasing contract
While the financial institution can only terminate the leasing contract if the unpaid leasing rental exceed three monthly installments (art. 18 para. 2LCC), the leasing taker can cancel the leasing by observing a minimum period of 30 days for the end of a contract quarter (the leasing contract can be interrupted four times a year). In the event of early termination of the lease, the amount to be paid can to be very important. For a leasing contract subject to the LCC, he will owe indemnity corresponding to the difference between the loss in value of the asset and the amount already paid (cancellation costs for early termination of the leasing contract). The amount of the penalties in the event of anticipated termination of the lease by the holder is determined according to a table which must be annexed to the contract (art. 17 para. 3 LCC). The principle is that the earlier the lease contract is terminated, the higher the early termination costs, even if the reasons for the termination of the lease are due to serious causes, such as unemployment, divorce or illness. However, the table in question must be drawn up in accordance with recognized principles (article 11 para. 2 letter g LCC). The Federal Court specified that the table should not contain disguised penal clauses (4A.404 / 2008 of December 18, 2018).