Open-ended vs. Closed-ended Leases

Open-ended vs. Closed-ended Leases

**This post contains affiliate links and the publisher may be compensated if you make a purchase after clicking on these links.** You may see a lease referred to an "open-ended" or "closed-ended", if you do it's likely to be in the fine print, legalese, or wherever the dealer/manufacturer/lessor has put some important but confusing details they hope you won't read.  Even worse, maybe the advertiser won't put it in the fine print but puts "open-ended lease" or "closed-ended lease" in big print next to some out of this world offer - how do you know whether it's a good deal or not? What's the Difference Between Open-ended and Closed-ended leases? In short, in an open-ended lease the lessee is the one on the hook if the actual value at the end of the lease is below the residual value set at lease inception, and in a closed-ended lease it is the lessor.  Usually, your contract will be a close-ended lease, but it’s still...
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Leasing vs. The Most Powerful Force in the Universe – II

**This post contains affiliate links and the publisher may be compensated if you make a purchase after clicking on these links.** In part 1 of this series we set the stage for why leasing is better than borrowing because the rent charge is simple interest while the finance charge on the loan is compound interest. Now, let's look at three cases: Great credit (3% APR), Good Credit (6% APR), and borderline Fair Credit (12% APR).  Obviously these are simply a single point within what are three good size ranges, but this example is best because we're doubling the APR each time.  Here's the deal, and we'll compare both financing and leasing: Now, let's look at the impact of the 3%, 6%, and 12% APR (and equivalent money factor) on the actual monthly payment, the finance/rent charge, and the equity position after 36 months: Notes about the table: The bolded figures represent the better deal for the consumer for the given credit profile. The "Net Payments...
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