A closed-end car lease is the most predictable car lease…
With this type of lease, the number of months and monthly payment are set in advance. Even the residual value (which doubles as the optional buyout amount) is known before a lease is signed.
A closed-end lease allows us to walk away from the deal at the end of the term.
An open-end lease requires us to make a balloon payment at the end of the lease agreement. It equals the difference between the residual and fair market value of the asset.
Open end leases are commonly used in fleet or corporate leases. The main reason they are used are for corporate tax savings. Also, open end leases benefit those driving unpredictable numbers of miles.
My KTL USA At-Home Leasing System always takes advantage of closed-end leases. Its predictability allows us to stay within budget. My clients hate surprises… and having the risk of coming up with thousands of dollars at the end of the lease makes my clients uneasy.