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DEFINITION of 'Closed-End Lease'. A closed-end lease is a rental agreement that puts no obligation on the lessee (the person making periodic lease payments) to purchase the leased asset at the end of the agreement. Also called a "true lease," "walkaway lease," or "net lease.". Next Up. Capitalized Lease Method. Open-End Lease. Walk-Away Lease.
Closed-end leasing. The total lease cost can either be paid in a single lump sum, or amortized over the term of the lease with periodic (usually monthly) payments. Closed-end leases generally provide that the lessee is responsible for insuring the property, for maintaining it in accordance with the lessor's requirements,...
Closed-end Leases. Closed-end leases are based on the concept that the number of miles you drive annually is fairly predictable (12,000 miles per year is typical), that the vehicle will not be driven in rough or abusive conditions, and that the vehicle’s value at end of the lease (the residual value) is therefore somewhat predictable. At...
Closed-End Lease. Closed-end leases are based on the idea that you will drive less than an average of 12,000 miles a year, and that you won't drive in overly rough conditions. This means that the value of the car at the end of the lease, called the residual, can be predictable to car manufacturers and dealers.
Definition of closed-end lease: Consumer lease (such as a common automobile lease) that neither gives the option nor requires the lessee to buy the leased item at the end of the lease period. Also called walk away lease.
Closed End Lease vs. Open End Lease. On the other hand, if the value of the car at the end of the lease term is worth more than the residual value, the leasing company will pay you the difference between that value and the residual value. As you can probably tell, open end leases can cost more than closed end leases. They are generally used more for commercial business leasing.
The closed-end lease is more popular with consumers. This type of lease put the lessor (the one who lends the vehicle) responsible for the depreciation, but in return the lease agreement limits the mileage and protects the vehicle from excessive damages. The contract predicts that the wear and tear will be normal.
Lease End. A closed-end lease allows you to return the vehicle at lease end, pay any extra charges and walk away once the lease expires. You can also choose to purchase the vehicle if you have the money or can qualify for a loan.
The closed-end lease is part of the big picture for outsourced fleet management. Under this philosophy it's the lessor's job to estimate the vehicle's value at lease end, so better leave it to the experts. With this burden, the fleet management company chooses optimal reserves for depreciation and has a greater say in fleet selection.
Closed-end leases are most common for consumer leases, but consumers are not able to consider the lease payments as tax-deductible unless the vehicle is used in conducting their business and the consumer can meet IRS rules for deducting those costs.