Are there different kinds of leases?
Yes, several forms exist.
- Under the "closed-end" lease contract, sometimes called a "walk-away" lease, the car's value when you return it does not matter unless you have put extreme wear on the car. You return the car at the end of the term and "walk away." Payments are higher than under an open-end lease because the lessor (the leasing company) takes the risk on the car's future worth.
- An "open-end" lease involves lower payments. However, you gamble that the car will be worth a stated price, the "estimated residual value," at the end of the lease. If it’s appraised value at the end of the term equals or exceeds the specified residual value, you owe nothing and may be refunded the difference, if your contract provides for a refund. However, if it is worth less, you pay some or all of the difference, often called an "end of lease" payment.
>>How does leasing differ from renting?
>>Are there different kinds of leases?
>>What will a lease cost me?
>>May I renew or extend my lease at the end of the term?
>>May I escape my lease early?
>>What is a purchase option?