Types

There are two types of car leases: closed-end and open-end.

Closed-end Lease

When the car is returned at the end of the lease period, the lessee may be responsible for such charges as excess mileage (more than the specified mileage in the agreement) or excess wear and tear on the car. The lessee will also have the option to buy the car for an amount determined at the beginning of the lease period plus a processing fee.

Open-end Lease

This kind of lease is more suitable for commercial businesses as all financial risk falls on the lessee. In an open-end lease, the lessee is responsible for paying the difference between the estimated end-of-lease value, which was determined at the beginning of the lease, and the actual market value of the vehicle at the end of the lease.

Advantages of Leasing

The monthly payments for leasing a car are usually lower than monthly payments for purchasing the same car. The upfront costs, such as down payments, taxes and title and registration fees also are lower for leasing. You can make a larger down payment on a lease to reduce the amount of the monthly payments.

Warnings

According to Automotive.com, never sign a car lease for longer than the car manufacturer's normal warranty period. This way the car will be covered for the time that you have it. Don't buy an extended warranty for a car that you don't own. Early termination of a car lease can result in fees.

Source:

Automotive.com

Leaseguide.com