| By :
Dirik Hameed
Leasing a car is soon going to be the most popular way of owning a car. The value of a car depreciates once it is bought. Because of this, the car models used by car leasing companies are the ones whose value can be retained for a long time just to ensure some profit comes from them. There are two main types of car and leasing that clients can access. To begin with is the walk-away lease or otherwise called the closed-end lease. Here, all financial risks of the car are covered by the leasing company. The cost of extra miles covered that were not included in the contract or extreme damages incurred are the only charges payable by the client. What the leasing company terms as excessive damage is clearly stated and explained on the agreement documents. The main responsibility of the client is to take the vehicle back to the leasing company at the end of the contract in the best possible condition. This type of car lease deal carries a number of things that are considered. The first is that it is possible to estimate the miles that can be covered by a client using the leased car in one year. This in most cases is taken to be about 12,000 miles per year. The other thing is that it is assumed that the client will drive the car well and maintain it in good condition. Thus, reckless and careless driving of the client are not even considered. Following this, and the leased car's residual value is estimated. By definition, residual value, in estimate, is the value of the car at the end of the lease period. How well the owner cared for and drove the car is what determines this. Leasing companies are able to estimate the residual value of a car before leasing it out. In a case where the car is returned to the company being of less value than the residual value, the company covers all the financial responsibilities. The open-end lease is the second type of lease. In this type of lease, all the financial responsibilities and risks are taken up by the client. Most business people and commercial clients opt for the open-end lease. This is because the business can be able to cater for the expenses incurred here while benefiting from unlimited use of the vehicle. There are no mileage limits with open-end car lease. These vehicles travel long distances for business assignments and it is almost impossible to predict how many miles they will cover over any period of time. With open ended leases, the client pays the difference in value of the estimated residual value and the actual value of the vehicle at the end of the lease period. However, it is common to find that the residual value in an open ended lease is less than that of the closed end lease. Both options carry their own benefits and thus the choice of which of the two tot take up is totally dependent on your need for the car.
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