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Types of Leases
There are different types of leases:
- Closed-End Leases:
In a Closed-End Lease, you make a set number of lease payments during the term of your lease and return the vehicle to your New Car Dealer at the end of the lease term. You are not required to make any additional payments unless there is physical damage to the vehicle, such as Excess Wear and Tear, or the number of kilometres you have driven is higher than the kilometre limit set out in the lease.
At the end of the lease, your options are:
- return the vehicle
- buy the vehicle (if there is a purchase option)
- lease a new vehicle
Most New Car Dealer's leases are the closed-end type.
- Open-End Leases:
In an Open-End Lease, you make a set number of lease payments during the term of your lease and return the vehicle to your New Car Dealer at the end of the lease term. Then an adjustment will be made. You will be required to make an additional payment covering the difference between the actual value of the vehicle at the end of the lease and the Residual Value stated on your lease contract. However, if the value of the vehicle is more than the residual value stated on your lease, then you are entitled to the difference.
For example, if the residual value in your lease is $8,000,00, and the dealer can only determine a wholesale value of $7,500.00, you will have to pay $500.00. If the vehicle is worth $8,500.00 to the dealer, they will pay you $500.00.
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