Main Types of Car Leases

You will encounter 2 basic types of car leases when you are comparing car leasing companies. The options presented in the leases make it better for all kinds of customers to find their ideal leasing arrangement with the company.

Open Ended Car Lease

An open ended car lease means that you are responsible for the financial risks of owning the vehicle. For businesses, this is an ideal arrangement because you can write off or expense the risk, and you only have to pay the remaining residual cost of the vehicle at the end of the contract, which is quite low especially for businesses. For personal leasing, however, the open ended car lease will mean that you make higher monthly payments for the vehicle to cover the financial risk that you have assumed.

With this type of lease, you are responsible for the vehicle’s market value at the end of the period. You may be required to buy the vehicle and sell it to pay off the residual and market cost of the car, which now involves taxation and car valuation. Businesses have a better chance of doing this than individuals leasing the vehicle with an open ended lease.

Closed Ended Car Lease

The closed ended car lease is the most popular car leasing option for individuals because it has minimal obligations by the end of the leasing period. As long as the car is used in relatively good driving conditions, meets the required mileage, and that the value of depreciation for the vehicle can be estimated, anyone can lease cars at a good rate and return it in the end.

The residual value of the car often determines whether you will buy it from the company or whether you will return it. If this amount is higher after the leasing period, you may opt to purchase the car and sell it for a profit, but if it is lower, the company will take up the cost when you return it. It is all up to you to decide what to do at the end of the lease contract depending on the outcome of handling the vehicle.

Before indulging in vehicle leasing you should always know which of these two types of leases you are being offered and what value they present to you. Businesses and individuals have different needs so choose the right lease that will serve you best.