Now that you have the basics on open-end leases, it’s time to discuss its counterpart; closed-end leases.

Closed-end leases are your typical consumer lease. There’s no difference, however, when using this type of lease in the corporate world. Corporate volume may present additional strategy not found in the consumer market. I’ll get to that later. First, here are the basics on closed-end leases.

Just like the milk in your fridge, closed-end leases come with an expiration date. The only difference is you may still want your vehicle after it’s past due; I’d stay away from the milk at that point. The typical lease period with closed-end is 36-48 months. Once D-day hits, the vehicle goes back to the lessor. You can buy it from them at that point, but you are under no obligation and no one will hold a gun to your head to do so. The purchase price is typically determined at lease initiation.

There are mileage restrictions when signing on to a closed-end lease. Mileage limitations are typically between 12K and 15K, with overage charges per mile after that limitation. This makes closed-end leasing unattractive to most corporate buyers since fleet vehicles can cover that in their sleep. Higher mileage limitations can be negotiated, but this will inflate the monthly and lifecycle costs.

Wear and tear is the next basic principle you need to wrap your head around with closed-end leases. Leasing companies will charge extra for damage to the vehicle and any excessive repairs. The reasoning behind this is the dealer expects you to not buy the vehicle at lease termination, meaning the dealer has to hawk it. Since the dealer has to resell it, and part of their profit on the lease depends on the resale value, they want to be reimbursed for any whoopings you administered that may take away from the resale value. There’s no set standard price per scratch; this is up to the discretion of the dealer.

These are the bare-bones of closed-end leasing, but are really all you need to know to get the foundations laid for your knowledge in fleet management. The minutia is just that. Next time around, I’ll discuss some strategy as to whether this may be the right fit for you.
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Jazzy Sourcer

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