Closed-End Lease
Definition of 'Closed-End Lease'A rental agreement that puts no obligation on the lessee (the person making periodic lease payments) to purchase the leased asset at the end of the agreement. Also called a "true lease", "walkaway lease" or "net lease". |
|
Investopedia explains 'Closed-End Lease'Since the lessee has no obligation to purchase the leased asset upon lease expiration, that person does not have to worry about whether the asset will depreciate more than expected throughout the course of the lease. Thus, it is argued that the closed-end leases are better for the average person.For example, suppose your lease payments are based on the assumption that the $20,000 new car that you are leasing will be worth only $10,000 at the end of your lease agreement. If the car turns out to be worth only $4,000, you must compensate the lessor (the company who leased the car to you) for the lost $6,000 since your lease payment was calculated on the basis of the car having a salvage value of $10,000. Basically, since you are buying the car, you must bear the loss of that extra depreciation. But, if you have a closed-end lease, you don't buy the car so you don't bear the risk of depreciation. |
Related Definitions
Articles Of Interest
-
New Wheels: Lease Or Buy?
These two major ways to obtain a car have very different advantages and drawbacks. Find out which is best for you. -
An Introduction To Depreciation
Companies make choices and assumptions in calculating depreciation, and you need to know how these affect the bottom line. -
Top 7 Most Common Financial Mistakes
Choose fortune over disaster by avoiding these money traps. -
Mondelez Isn't As Good As Nestle, But Priced Like It Is
Investors seem to bullish on Mondelez, given the relative performance at Kellogg and Nestle. -
How Spring Cleaning Can Make You Money
Spring cleaning is a well-established tradition, but you can also make money by selling your unwanted goods. -
5 Painless Ways To Save More Money
Saving money can be a chore, but these tricks put money in your pocket with no effort at all. -
Restaurant Segments Going Under
Diners are as American as apple pie, yet their popularity is waning with today's consumers. -
5 High-Priced Apple Products
With the skyrocketing demand of anything Apple, many have profited off the demand by selling Apple merchandise on the auction block. -
Best Valentine's Day Gifts For Your Man That Are Under $20
These inexpensive products make good gifts for the man in your life. -
Best Valentine's Day Gifts For Women That Are Under $20
Clichés are clichés for a reason. Sometimes the most clichéd gift can actually be an ideal one.
Free Annual Reports