Update Commercial 2026: Leasing

Decision on compensation for diminished value in kilometer-based leasing

In its judgment of 28 October 2025 – 6 U 84/24 (in German), Stuttgart Higher Regional Court clarified when a lessor may claim compensation for diminished value at the end of a kilometer-based car leasing agreement and at the same time strengthened the rights of the lessee.

Facts

The claimant (lessor) asserted various items of damage against the defendant (lessee) after the end of the contract and claimed just under EUR 9,500 by way of compensation for diminished value. Under the standard terms and conditions, the application of which was undisputed, the vehicle had to be returned in a condition appropriate to its age and the contractually agreed mileage, and it had to be safe for use on public roads and in operation. The terms further provided: “If the vehicle shows a diminished value as a result of damage or excessive wear and tear, the lessee will com­pensate the lessor for this diminished value. Normal wear and tear will be disregarded.”

Decision

The court found that, based on the contractual provisions, the lessor was entitled to have the vehicle returned in a condition consistent with its age and the agreed mileage. According to the court, the compensable diminished value is therefore the reduction in value the vehicle shows on return because it falls short of this condition.

The court further stated that only defects that go beyond normal signs of wear and tear can be taken into account. This covers defects which (1) would not arise at all if a vehicle of the relevant type and make were used properly in accordance with the contract or (2) would typically be repaired by owners who use such vehicles themselves, given the vehicle’s type, make and age. This includes, for example, defects that impair operational or traffic safety.

Furthermore, the court held that the diminished value to be compensated cannot simply be calculated by adding up the full repair costs. A deduction must be made from those costs, reflecting the normal depreciation of such vehicles.

Conclusion

The judgment significantly restricts the scope for lessors to assert extensive claims for diminished value at the end of a contract term. The court expressly rejected using the total of all repair costs as the sole basis of calculation; only damage that clearly exceeds normal wear and tear is recoverable. Lessors who have previously applied a broader approach should therefore review and, where necessary, adjust both their contract wording and their settlement practice. It is advisable to have existing leasing agreements and return procedures examined from a legal perspective to ensure that any remaining claims for diminished value can still be effectively enforced.

This article is part of the "Update Commercial 2026". All insights and the entire report as a PDF can be found here.