The Legal Situation When Buying a Vehicle Through Leasing
Leasing has become one of the most common ways to buy a vehicle. However, many people do not fully understand the legal aspects involved. Both the lessee (the person taking the lease) and the lessor (the financial institution) have rights and responsibilities under Sri Lanka’s Lease Financing Act. Today, MotorGuide explains the legal situation you should know before entering a lease agreement.
What is the Lease Financing Act?
The Lease Financing Act is the law that governs all leasing transactions. It clearly outlines the duties, responsibilities, and rights of both parties:
- Lessee – the person who obtains the leasing facility.
- Lessor – the bank or financial institution providing the lease.
By law, leasing companies must operate under this act and cannot offer facilities outside these regulations.
Legal Status of the Lessee
Right to Choose the Leasing Company
The lessee has the full right to research and select a reliable leasing company. Checking reputation, branch network, and service history is essential.
Right to Select the Vehicle
Under the Lease Financing Act, the lessee can decide which vehicle to lease. The leasing company cannot force a vehicle choice on the customer.
Right to Object to Unfair Terms
If a leasing company tries to change the terms of the agreement unfairly, the lessee has the legal right to object. This protection ensures that both parties must follow the signed agreement.
Legal Status of Leasing Companies
Regulated Institutions Only
A leasing company cannot be started at will. It must be licensed and registered under the Lease Financing Act and authorized to provide financial leasing services. Always verify this before signing any contract.
Right to Monitor Vehicle Condition
The leasing company has the authority to check whether the vehicle is properly maintained and used responsibly during the lease period.
Defaulting on Payments
If the lessee fails to pay installments, the leasing company has the right to cancel the agreement. However, repossession of the vehicle must follow a legal process.
How Can a Leasing Company Take Possession of a Vehicle?
A vehicle cannot be forcibly taken back without due legal process. The steps are:
- Notice – The leasing company first issues a written demand for overdue installments.
- Agreement Cancellation – If the lessee still fails to pay, a notice is sent canceling the lease agreement.
- Court Petition – If the lessee refuses to return the vehicle, the leasing company can file a petition in the District Court.
- Interim Order – The court may grant temporary permission for repossession unless the lessee can prove valid reasons for defaulting.
- Final Judgment – After trial, the court decides whether the vehicle should remain with the lessee or be handed over to the leasing company.
Leasing is a convenient way to buy a vehicle, but it comes with serious legal responsibilities. As a lessee, you must understand your rights and duties. Similarly, leasing companies must follow the law and cannot act outside the Lease Financing Act. Knowing these legal situations helps you lease a vehicle safely and without future disputes.
