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Closed-end car leases are a good option for most consumers. Because most cars depreciate in value over time, closed-end leases protect the lessee from having to pay the difference between the value of the car when they leased it and the current market value. This cost is absorbed by the car manufacturer.
When signing a closed-end lease, you agree to mileage limits (usually 12,000 miles annually) and you agree to keep the car in good condition. If you go over the mileage limit or fail to maintain the car properly, you will be charged additional fees at the end of the lease.
Maintaining the car requires regular oil changes, tune-ups, tire rotations and replacement as well as yearly inspections according to your state's requirements.
You may have to go the dealership where you leased the car for maintenance checks or you may be able to go to a licensed mechanic that specializes the type of car you lease.
The cost of maintenance is usually paid for by the manufacturer when maintenance is performed at a dealership. You may be responsible for paying the maintenance fees if you take the car to an outside mechanic. -
Open-end leases do not include a mileage limit. This is why these leases are attractive to business owners or those who travel a lot for work. You will still be responsible for regular maintenance on the vehicle, however.
If you sign an open-end lease, you will be responsible for paying the difference between the cost of the car when you leased it and the current market value when returning the car to the manufacturer.
If the market value of the car remains unchanged or increases, you will not have to pay extra; you may even earn a refund. In most cases, the value of the car will drop, so be prepared to pay the difference. -
Other types of car leases to consider are subvented leases and single-payment leases.
Subvented leases offer lower interest rates and higher estimated market values when returning the car. High estimated values lower the difference between the value of the car when you leased it and the current market value upon return. This lowers what you would owe at the end of the lease.
If you want to pay the entire lease sum at the beginning of the lease and not have to worry about monthly payments with interest, ask for a single-payment lease.
Make sure to determine the interest charges yourself to make sure you're getting a fair deal from the leasing agent.
