Choosing The Best Type Of Car Lease

Two Basic Types of Car Lease

Two Basic Types of Car Lease

Generally, there are two basic types of car lease: closed ended and open ended car lease. Any individual who wishes to enter in a car leasing deal should know first the difference between the two to determine which type is the best.

Closed Ended Lease

Closed ended lease are often called walk away lease because at the end of the leasing period, you return the vehicle to the dealer, pay for excess mileage or additional wear and tear damages and can walk away afterwards.

In a closed ended lease, the car leasing company predicts a fixed residual value for the car based on the mileage tolerance provided in the terms and conditions of the leasing deal. If at the end of the leasing period, the residual value is much lower than the predicted fixed value, then you have no obligation to shoulder any additional depreciation of the vehicle

Open Ended Lease

Open ended lease is somewhat rarer than closed ended lease. In this type of lease, residual value is also predicted based from the mileage but has not fixed value. More often, you are likely to have lower lease payments with open ended lease than the closed ended one because financial risks are shouldered by the lessee. If at the end of the leasing period, the estimated residual value is lowered due to the current market conditions, then you are obliged to pay for this difference.

Balloon Car Leasing

Balloon car leasing is considered a variation of the two major types of car lease and at the same time it can be ma major leasing dilemma as well. In most cases, you start with a lower monthly payment in balloon car leasing. It actually allows the clients to have a better vehicle than he can currently afford anticipating in the future that they will have bigger income to finance their lease. This is a form of marketing strategy to encourage more clients to engage in such deals. After a series of intervals, your payment will increase enormously and financial problems will arise. More often, its only the dealer who benefits from this.

Lastly, to find the best type of car leasing deal, you can shop around or check the internet. Read the terms and conditions of various online car leasing companies and compare which among them offers the most competitive deal. Carefully read and understand the agreement and raise your concerns and other clarifications before you finally sign in.

by: Peter Patker

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