Open-End vs Closed-End Lease.

In plain English

These are the two basic types of vehicle lease, defined by who is on the hook if the car is worth less than expected at the end. In a closed-end lease, the most common kind for consumers, you simply return the car and owe nothing for lost value as long as you stayed within the mileage and wear terms. In an open-end lease, more common for business and fleet vehicles, you may owe the difference if the car's actual end value comes in below the value set in the contract. The trade-off is that open-end leases sometimes offer lower payments in exchange for taking on that depreciation risk yourself.

01Why it matters

Signing an open-end lease without realizing it means you could owe a large balloon-style payment at the end if the car depreciated faster than expected. Knowing which type you have tells you exactly how much risk you are carrying.

02The math, step by step

In a closed-end lease, you return the car worth $1,000 less than projected and owe nothing extra. In an open-end lease with the same shortfall, you would owe that $1,000 (the gap between the contract's end value and the car's real value) when you turn it in.

03What this is NOT

04Receipts

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