Definition of Closed-End Leases and Open-End Leases

So the terms used in the leasing industry can be a little confusing. The word "lease" itself, is different. Today I will explain the difference between "Closed-End Leasing" and "Open-End Leasing."

Closed-end Leases – AKA (walk away, long term rental, operating lease, short term lease) This will be most of our summer camps, tour and adventure operators and colleges – and other business that have need for 1-time need, or short term seasonal or cyclical needs

Closed-end leases are the most common for consumer leases today. This type of lease allows you to simply return your vehicle at the end of the lease and have no other responsibilities other than possible payment of excessive damage or mileage charges.

At the time you lease, the leasing company estimates the vehicle's lease-end residual value based on the expected number of driven miles. If the vehicle is actually worth less than the residual when you turn it in, the leasing company takes the financial hit, not you.

On the other hand, if the vehicle is worth more than the residual and you have the option to purchase, you may want to buy the vehicle and keep driving it — or sell it and make a profit. This happens frequently.

Open-end Leases – AKA (capital lease, finance lease, commercial lease, lease with required balloon, Lease with conversion – required buyout) This will be the rent of the market, long term fleets, cycling and rotation to cover ongoing use, high miles, and special equipment.

In open-end leases, you are responsible for paying any difference between the estimated lease-end value (residual value) and the actual market value at the end of the lease. This could amount to a significant sum of money if the market value of your vehicle has dropped or you drive many more miles than expected. 

Often, the residual for an open-end lease is set much lower than for a non-business closed-end lease, which reduces the lease-end risk, but can significantly increase the monthly payment amount.

Kline Van & Specialty Rentals can make a custom price package matched to your exact needs. This way the you, the customer, are not paying for more than what you require! Click here to get a custom quote today! 

You can contact us M-F at (816)554-3344 

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