How does an auto lease work?
There are two types of lease arrangements: closed-end (“walk-away”) and open-end (finance). Heres how they work. Closed-End: The Dealer Bears The Risk Of Depreciated Value When a closed-end lease is up, you bring the car back to the dealership and “walk away.” You must return the car with only normal wear and tear, and with less than the mileage limit specified in your lease. Since the dealer is bearing the risk that the value of the car at the end of the lease will go down, your monthly payment is higher than with an open-end lease. Open-End: You Bear The Risk of Depreciated Value With the open-end lease the customer bears the risk that the car will have a certain value (called the “estimated residual value”) at the end of the lease. The monthly payment is lower because of this risk. When you return the car at the end of the lease, the dealer will have the car appraised. If the cars appraised value is at least equal to the estimated residual value in the agreement, you wont need to pa
