Leasing a car is soon going to be the most popular way of owning a car. Cars depreciate in value when you buy them. With this in mind the models of cars used in leasing are the ones that retain their value for a much longer time so that leasing companies can benefit from them. There are two main types of car and leasing that clients can access.
The closed-end lease or otherwise called the walk-away lease is the first among these. The car's financial risks are taken up by the leasing company in this kind of lease. The client only covers the cost of any extra miles covered that were not covered in the contract and/ or extreme damages incurred. What the leasing company terms as excessive damage is clearly stated and explained on the agreement documents. Taking back the vehicle to the leasing company in as good a condition as when initially leased is the client's main responsibility.
Several things are put into consideration in this type of lease whether it for a car or whether you need to lease a van. The first is that it is possible to estimate the miles that can be covered by a client using the leased car in one year. This in most cases is taken to be about 12,000 miles per year. Also, the client is assumed to drive the car well and keep it in good condition. This means that careless and reckless driving is not expected. Following this, and the leased car's residual value is estimated. The estimated value of the car at the end of the lease period is what is termed as residual value. How well the owner cared for and drove the car is what determines this. Leasing companies are able to estimate the residual value of a car before leasing it out. In a case where the car is returned to the company being of less value than the residual value, the company covers all the financial responsibilities.
The second kind of lease is the open-end car lease. Here, the client is fully responsible for all the financial obligations and risks. Most business people and commercial clients opt for the open-end lease. This is because the business can be able to cater for the expenses incurred here while benefiting from unlimited use of the vehicle. Open ended car leases do not have any mileage limits set. The chance of being able to approximate the miles that will be covered by these vehicles is close to not considering the distance they cover on business assignments.
At the expiry of the contract in an open ended lease, the client will pay the difference between the estimated residual value and the actual vehicle value. The residual value in open ended lease is in most cases lower than that of the closed end lease. What you need the car for is the main consideration when deciding which car lease option to take up as the two options have separate benefits.