4 Types of Auto Leases to Consider

When it comes time to lease a new car, people should first consider the different types of auto leases that are available to them. There are four main types of auto leases: open ended, closed ended, single payment and subvented. Knowing about each type of auto lease will help in deciding which one to use when leasing a vehicle. 

Open Ended Auto Lease

In this situation, the lessee is responsible for paying the difference between the residual value and the actual market value of the vehicle at the end of the lease term. This is known as an “end of lease” payment. If for any reason the market value is higher than the residual value at the end of the lease term, the lessee may be entitled to a refund of the difference.

This is the best option for people that drive a lot because there are no mileage restrictions. This type of lease is commonly used by commercial businesses because their mileage is high and there is less risk since the expense can be written off on taxes at the end of the year.

Closed Ended Auto Lease

These are the most popular kinds of auto leases. They are more commonly known as a “walk away” lease because they allow the customer to walk away from the car at the end of the term without any further financial obligation. The walkaway still gives the customer the option to buy the vehicle. The customer is not responsible for any difference between the current actual value of the car and the residual value as stated in the lease agreement.

As long as the car has been cared for properly, and has not exceed the mileage--usually no more than 15,000 miles per year--for the life of the lease, the customer does not have anything to worry about.

If the mileage has been exceeded or there is damage to the vehicle, the customer may be liable for additional charges.

Single Payment Auto Lease

The single payment auto lease is a type of lease that is paid for all at one time, rather than in monthly installments. It saves the customer interest and other charges throughout the life of the lease.

However, some dealers may try to be sneaky and include interest charges for the life of the lease into the single payment. It is important to read the paperwork and calculate the charges independently of the dealer to ensure the company is playing by the rules.

Subvented Auto Lease

A subvented auto lease may also be referred to as ”Subsidized-by-the-manufacturer.” These leases are generally the best deal around because the car manufacturers are willing to lower the rates and offer more incentives to help move vehicles from the lot.

In most cases, manufacturer’s set a higher residual value which will cause them to lose money, but help the customer to save, so this is the best kind of lease to have. 

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