Car Leasing 201 - Types of Auto Leases: Close End Car Leases

Close-end Leases

Close-end leases (define: closed end lease) is the typical type of car lease you hear about today and which most consumers get into. These types of leases are commonly known as “walk-away” leases. The close-end car lease allows the consumer to return their car lease to the dealership or lease company at the expiry of the lease agreement. No other obligations or responsibilities are necessary with the close-end lease type.

A close-end car lease is built around a few factors

• The number of miles or kilometers the consumer drives annually
• The car will be driven in respectable conditions – not driven roughly or abused
• The value at the lease termination, or commonly known as the residual value, can be estimated

The residual value is important to know at the end of your car lease since if the vehicles value is worth more than the residual, the consumer may then choose to purchase the vehicle. Purchasing the vehicle with a higher residual value than originally estimated by the leasing company may provide the consumer the option to profit from selling the vehicle. This is commonly done by consumers who end their car lease and purchase the vehicle.
Contrary, if the residual value of the car is worth less than the leasing companies estimates, then the leasing company will assume the financial burden and not the consumer.

Part I: Types of Auto Leases: Open end Leases