Main Differences of Open Ended Vs. Closed Ended Leases

Main Differences of Open Ended Vs. Closed Ended Leases
Main Differences of Open Ended Vs. Closed Ended Leases, There are two types of automotive leases available in the United States; an open-end lease and a closed-end lease. Read on to learn about each and their differences.

What is Close Ended Leasing?

  • Close-ended leasing is based on a pre-determined number of miles a customer will drive in a year.
  • At the end of the leasing term, the customer is responsible for any excessive damage or additional mileage overages.
  • Any loss of value, through depreciation of the vehicle, is the responsibility of the leasing companies, not the individual.
  • The lessee has the option to purchase the vehicle, at the end of the term.
  • The lessee has no responsibility in supporting the vehicle’s resale value.
  • The fixed term of the lease is usually between 24 to 36 months.
  • Interest rates are fixed with no variation in payments.

What is Open Ended Leasing?

  • Open-ended leasing is typically used in commercial leasing.
  • The lessee is responsible for paying any difference between the estimated lease-end value (residual), and the actual market value at the end of the lease agreement.
  • The total lease costs are calculated at the end of the lease term, and the vehicle(s) under the lease are sold.
  • If a loss is incurred at the end of a lease term, it is treated as an additional payment.
  • The Federal Customer Leasing Act provides a measure of protection for open-ended leases by restricting the end-of-term liability to no more than the total three monthly payments.
  • Open-ended leases include variable depreciation rates.
  • Leases are customized in variable terms with no early termination fees or mileage restrictions.

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