The Different Types Of Auto Leases

December 21, 2009

Not all auto leases are the same. There are several different types that are tailored to different types of individuals with unique needs. Each type has its own benefits and its own appeal. By gaining a working knowledge of each of these types of leases you can decide if one of them might be right for you.

Perhaps you avoided leasing a vehicle before because you thought there was only one type of lease out there. Now you are about to learn the truth.

The Popularity Of Closed-End Leases

The closed-end lease is the most popular type of lease. This is the traditional type of lease where you turn in the car at the end of your lease term and that is the end of your involvement with that vehicle. You are not going to pay for the difference between the initial value of the car and the residual or remaining value of the car when you turn it in. If it turns out that the ending value of the car is less than expected then you will not be forced to pay the difference.

There are some situations where you will be required to pay more at the end of your lease, however. If you drive more than the amount of miles allotted by your lease then you will be hit by charges for that. You could also be required to pay for any wear and tear that is beyond what the lease defines as normal wear and tear.

The Risk Of Open-End Leases

Open-end leases are different because the lessee will have to pay the difference between the expected residual or final value of the vehicle and the actual final value of the vehicle at the end of the lease. This means you may have to pay more at the end of the lease or, if the value of the car is more than expected, you may even get a refund. This type of lease is a gamble. Because you pay for the difference in value, this type of lease tends to come without any limits of mileage. This lease is ideal for those who drive a lot.

The Convenience Of Single-Payment Leases

Single-payment leases are paid for with a single payment at the beginning of the lease. This allows a lessee to sidestep a lot of interest charges. You have to be careful with this type of lease and make sure that a dealer does not attempt to include all your interest charges into this one lump sum. If they do then the appeal of paying the whole amount at once is not as great.

The Savings Of Subsidized-By-The-Manufacturer Leases

These are leases that are almost always fantastic deals. They give you the benefit of low interest rates or may predict a higher residual value for the car at the end of your lease period which means that you will pay less for your lease. While a deal like this must be carefully investigated just like any other, a subsidized-by-the-manufacturer lease can be a great bargain.

The different types of auto leases allow you to risk, play it safe, pay all at once, or potentially save a lot of money. The variety of leases allows you to choose which option will work best for you. While you may end up going with the most popular option, you should be aware that you do have choices.