Closed-End Lease: Overview And Examples In Car Leasing

Car ownership seems to be a straightforward transaction. You save money, buy a car, and drive off into the sunset. But let's cruise through the world of car leases. What if we told you that a leased car could provide an avenue to experience the joy of driving your favourite car models without a long - term commitment or hefty investment? The car subscription service has changed people's perceptions about owning a car.

Specifically, we’re going to zoom in on an often overlooked but extremely useful concept in the leased car world: the ‘Closed - End Lease’. Buckle up as we take you on a detailed ride through this intriguing route to vehicle use.

What is a closed-end lease?

A closed - end lease, also known as a 'walkaway lease' or 'true lease', is essentially a rental agreement with no obligation for you, the lessee, to purchase the leased car at the end of the agreement.

This type of car lease lets you enjoy all the perks of having a vehicle - be it an SUV, hatchback, sedan, or electric model - for a fixed duration without worrying about its depreciation value. It's an attractive option for those who value predictability in payments and wish for less anxiety over unforeseen expenses.

How is it different from an open-end lease?

Here’s where things get interesting! Just like there are different flavours of ice cream, there are many car leases too - primarily open - end and closed - end leases.

An open - end lease gives you more flexibility with terms. However, you take on the depreciation risk of the asset. In a closed - end lease, the lessor (the company leasing the car to you) takes on the depreciation risk, but the terms are more stringent.

To break it down further:

This makes closed - end leases better for the average person who prefers fixed rates and predictability over flexibility.

Pros and cons of a closed-end lease

But like any good story, there are two sides to a closed-end lease. Here’s a quick look at some of its key pros and cons:

Pros:

1. No obligation: When your agreement ends, you can just walk away - no need to purchase.

2. Predictability: Enjoy fixed rates and set terms throughout your lease.

3. Less anxiety: Let someone else worry about depreciation!

Cons:

1. Tiered fees: Extra miles can mean extra charges.

2. Unexpected expenses: You’re responsible for any excess wear and tear.

3. Exit fees: Ending the agreement early often means additional fees.

Examples of closed-end leases

Let’s take an example to understand this better: Suppose you're leasing a brand-new car worth ₹17 lakh for 3 years under an open-end lease. The leasing company assumes that the car will be worth ₹7 lakh by the end of your lease term (residual value). If it turns out to be worth only ₹5 lakh, you'll be responsible for compensating the ₹2 lakh loss in value.

On the flip side, with a closed-end lease, you won’t have to worry about this scenario at all! You get to enjoy driving your car without bearing any depreciation risk. But wait, there’s a cherry on top - if at the end of your lease, the market value of the car is higher than the predetermined residual value, you can buy the car at that lower price and sell it at the higher market price.

Conclusion

If all this talk of what is a closed - end car lease got you thinking about trying it for yourself, you might want to check out Quiklyz. We offer a comprehensive car subscription service and leasing service geared towards flexibility and convenience. Whether you're an individual or a corporate client, with Quiklyz, you can enjoy the perks of having a car without the burdens of ownership.

So there you have it! Closed - end leases present an alternative vehicle usage model that blends flexibility with predictability. Whether it’s keeping up with the latest car models, avoiding depreciation hassles, or simply experiencing hassle - free driving, closed - end leases could be your way to go! Visit Quiklyz today for a personalised car subscription experience. So, try our car subscription plans today.