Posted on: 3 December 2020
Both open-end car leases and closed-end car leases have been around for a long time. In the past, it was open-end car leases that were geared for businesses with large fleets and closed-end leases that were for consumers, but this has begun to change. Today, the closed-end lease has become a good option for a business, especially one with a need for a small fleet of cars. The following are a few reasons this type of lease may be right for your business.
You don't get stuck with depreciation costs
With an open-end lease, you are basically buying the car. The difference is that at the end of the lease, you have the option to buy the car. But if you decide not to buy the car for the remaining balance, you will be required to pay any difference between the balance and the market value of the car. However, with a closed-end lease, you don't have to decide whether to pay above-market value or pay the depreciation. You simply walk away. The contract is over, and you have no further obligations.
A closed-end lease offers fixed costs
For a smaller business that is operating on a tight budget, you don't have to worry about how much your fleet will cost you in any given month. Many open-end leases will have a variable interest rate portion to the contract, so you never know exactly how much your cost for the total fleet will be. A closed-end lease offers a fixed cost for the cars, so you always know what your monthly expense will be.
They offer flexible terms
In the past, one of the knocks on a closed-end lease was that they weren't flexible in what you could get, but that has changed. You can shop around for a great many features in a closed-end contract. One example is with mileage. In the past, an open-end lease offered great flexibility for the annual mileage allowed, but a closed-end lease had low mileage contracts. There are many possibilities with mileage in a closed-end lease. Another example is the option to buy the car. This feature may be dependent upon many variables, but the most important part is that the price is not likely to be above the market value, and you won't pay anything for the depreciation.
As a small business owner, a closed-end lease for a car fleet has become a viable option. They are ideal for a tight budget when a business owner wants to have predictable, monthly costs. There are no liabilities at the end of the lease, such as depreciation. Today's closed-end leases offer flexible terms that did not exist in the past, including the opportunity to purchase the car, but without any obligations.
To learn more about closed-end car leasing, talk to a lending company in your area.Share