A Guide to Car Leases and its Various Types

Car leasing instead of car purchasing is a terrific option, especially for those who find buying a car trifle out of their horizon. Today, owning a car has become imperative on one hand while the terrible economic situation has made it harder for an average person to afford the cost of a car. In this situation, a new and innovative method has spread through Birmingham, Solihull, West Midlands and other parts of the country i.e. cheap car leasing. Let us understand the term better as well as its various types.

What is car leasing?

Leasing a car can be explained in layman’s term as a long time rental of a car. Here you pay a portion of the vehicle’s worth in monthly or quarterly basis for a fixed number of years and an agreed number of miles. Once the term ends, you need to return the vehicle. If you are going for a personal car leasing, it allows you to own a new car every few years without paying for the entire amount of the car.

Types of car leasing

Broadly, there are two types of car leasing, open-end leases, and closed-end leases. Apart from it, there are various other types of local car leasing as well as luxurious car leasing. Let’s understand each type.

1. Closed-end leases

Also referred to as ‘walk-away’ leases, it is one of the most common leases taken today. In this type of lease, you return the vehicle at the end of the lease term. Here, you have no other responsibilities apart from paying for excessive damage or extra mileage charges.

This lease is ideal for all those who have more or less fixed and predictable miles that they drive their vehicles for. Additionally, they rarely drive their vehicles in rough and abusive conditions. When the lease is drawn, the leasing company estimates the vehicle’s lease-end residual value from the expected number of miles that the car would be driven during the lease term. If the actual value of the car comes to less than the residual value at the time of return of the car, it is the leasing company that would need to bear the financial brunt and not you. In contrast, if the vehicle’s worth is higher than its residual value, the client has the option to purchase or keep driving it. The biggest advantage of this lease is that it has an extremely low monthly rental for customers with good credit score.

2. Open-end leases

This type of contract is taken mostly by commercial business houses. It is because, in this kind of lease, it is the lessee and not the leasing company that assumes all financial risks. It does not pose a problem for any business house but can be so for an individual. Here the annual mileage is normally much higher and less predictable than the close-end lease type.

Here, the client needs to pay the difference, if any between the estimated lease-end value (the residual) and the actual market value at the time of lease-end. It can amount to a significant value if the miles driven are much higher than expected or the market value of the vehicle has dropped much more than anticipated. Usually, the residual in this contract is set much lower than the close-end lease to reduce the lease-end risk. However, this leads to a much higher monthly payment.

3. Sub-vented leases

It is a special discounted or subsidy lease that is offered by specific car manufacturers to a particular finance company or car shops associated with them. Often, this lease is offered by auto manufacturers when they need to get the vehicles out of their inventory or get those models out from their inventory which is in low demand. Here manufacturers offer extremely low rates and set a higher residual value of the car than forecast so that it gets a small estimated depreciation. Sometimes dealer incentives are also increased to reduce the car capitalized cost. This manufacturer’s loss becomes the customer’s gain. A person will excellent credit score can get such car leases at astonishingly low monthly rentals.


By: Rob Porter

Operating from Birmingham, West Midlands, Easy Lease Cars works diligently to make every model and make of car available to any person who dreams of owning it but feels it unaffordable. Via their innovative and fresh methods of cheap local car leasing, even the people with bad credit score now stands a good chance. Contact them today for more details about cheap car leasing.

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Article Tags: cheap car leasing Birmingham , Solihull , West Midlands

Submitted On May 17, 2017. Viewed 73 times.

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