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Types of Leases

There are two types of automotive leases available today, the "closed-end lease" and the "open-end lease".

Closed-End Lease

In the closed-end lease the residual value of the car at the end of the lease is pre-determined before the lease is signed. At the end of the lease period, you have the option to purchase the car for this price (plus a nominal administrative fee) or, the vehicle may simply be turned in to the dealer and you walk away. This is the most popular type of lease today.

Open-Ended Lease

The open-ended lease works the same way as the closed-end lease except that the residual value of the car is estimated at the start of the lease. When the lease expires, the estimate is compared to the actual market value of the car, and, you guessed it, you pay the difference which can be substantial. This type of lease is seldom used today for non-commercial leases while most consumers find closed-end leases best meet their needs.

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