Car leasing deals typically come in one of two types - open and closed. Before signing a contract, a fair amount of knowledge on this topic is advised.
The most common car leasing option for consumers is a closed-ended agreement. In this deal, you can simply return the leased car when the contract expires. You do not have to worry about other responsibilities other than paying for damages or excessive mileage.
This agreement is based on the idea that the car is not overdriven. A maximum allowed mileage you can put into the car, usually 10,000 miles per year, is included in the agreement. You have to pay a fixed amount for any excess as specified in the contract.
The car's expected residual value at the end of the contract is noted. If it is worth less than the predicted amount, you win although this does not happen a lot. If it is worth more, you can buy or keep the vehicle then sell it to make a profit.
Businesses usually choose an open-ended lease. This option is much more costly to the lessee than the leasing company. Mileage limits are more generous and less predictable in these deals.
You have to pay any difference between the residual value and the car's market value at the end of the contract. This could end up emptying your wallet.
For individuals, a closed-end deal is more suitable and more affordable. Car leasing for business is possible. Be sure to hire an expert to handle finances.
Description: Avoid a costly mistake before signing a car leasing agreement. Know the differences between open and close-ended car lease deals.
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