| By :
Dirik Hameed
The most popular way of car ownership will soon be leasing a car. Cars depreciate in value when you buy them. With this in mind the models of cars used in leasing are the ones that retain their value for a much longer time so that leasing companies can benefit from them. Clients have a choice of two main types of car lease. To begin with is the walk-away lease or otherwise called the closed-end lease. The car's financial risks are taken up by the leasing company in this kind of lease. 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. For starters, the number of miles that can be covered by a client using the leased car within a year can be easily estimated. In most cases, this is about 12,000 miles. Secondly, there is the assumption that the car will be well driven and maintained in good condition. This means that careless and reckless driving is not expected. 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. This is totally dependent on how well driven and cared the car was by the owner. 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 second kind of lease is the open-end car lease. In this type of lease, all the financial responsibilities and risks are taken up by the client. The open-end lease is more opted for by commercial clients and business people. This is because the business can be able to cater for the expenses incurred here while benefiting from unlimited use of the vehicle. The mileage on open-end car leases is of no limit. 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. At the expiry of the contract in an open ended lease, the client will pay the difference between the estimated residual value and the actual vehicle value. The residual value in open ended lease is in most cases lower than that of the closed end lease. What you need the car for is the main consideration when deciding which car lease option to take up as the two options have separate benefits.
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