Closed End Lease

Closed End Lease. Closed end leases are so called because they run for a fixed term and the lessor and lessee agree in the lease contract what the residual value of the property being leased will be. Closed end leasing is a contract based system governed by law in the u s. With a closed end lease also known as a walkaway lease you typically have a set lease term and mileage limits.

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A closed end lease is probably the type of lease that is most suitable for people like you and me.

Closed end lease. Designed mainly for consumers as opposed to businesses a closed end lease allows you to return the car at the end of the lease with no questions asked. A closed end lease is also known as a true lease walkaway lease or net lease. The leasing company estimates this value and sets expectations on mileage and wear. You re responsible for the vehicle s condition but the leasing company is responsible for any additional depreciation to the vehicle below the residual value at the end of the lease.

This means that the value of the car at the end of the lease called the residual can be predictable to car manufacturers and dealers. The lease terms in a closed end lease are more restrictive. This type of lease allows you to return your vehicle at the end of the lease and have no other responsibilities other than possible payment of excessive damage or mileage charges. A closed end lease is rate sensitive by make model and lease term with prime consideration being the vehicle s residual market value.

A closed end lease is a rental agreement that puts no obligation on the lessee to purchase the leased asset at the end of the agreement. With a closed end lease the term is typically set and monthly payments are based on the estimated residual value of the vehicle at the end of the term. The contract predicts that the wear and tear will be normal. Closed end leases are sometimes called walk away leases and are most common for consumer leases today.

A closed end lease traditionally has preset mileage restrictions over lease term usually 12 000 to 15 000 miles annually. This type of lease put the lessor the one who lends the vehicle responsible for the depreciation but in return the lease agreement limits the mileage and protects the vehicle from excessive damages. Closed end leases are based on the idea that you will drive less than an average of 12 000 miles a year and that you won t drive in overly rough conditions. It allows a person the use of property for a fixed term and the right to buy that property for the agreed residual value when the term expires.

Consumers nearing the end of their lease term typically return the car to the dealership they bought it from and they either start a new lease or walk away from it altogether. The closed end lease is more popular with consumers.