Why should I lease instead of buy a car?
There is nothing mysterious about leasing. Most people who "buy" a car or truck do so with money they "lease"from a bank or other financial institution.
Instead of buying the vehicle´s full lifetime of usefullness and disposing of the used car or truck while it still has some value remaining, you pay only for the portion of the vehicle´s useful life consumed during the term of the lease.
What are the different types of leases?
There are two basic lease programs available: Closed End (walk away lease) and Open End (finance lease).
In a closed End Lease, you the lessee are not responsible for any depreciation risk at the end of the lease. In this lease program you do have the opportunity to purchase the vehicle at the end of the lease for the fair market value, but there is no obligation to do so. You are only responsible for any abnormal wear and/or excessive mileage on the vehicle, if any.
In an Open End Lease a predetermined price is set at the start of the lease for which you may buy the car at the lease end. But if you decide not to buy the car at lease end you are responsible for the residual value when your lease period is over. If the car is worth more than the anticipated value, you recieve the difference.
What is residual value?
Residual value is what the remaining value is of a car after your lease is up. |