Open-Ended Leases vs. Close-Ended Leases

Bergstrom Pioneer Leasing will help you to determine what type of lease is right for your company, but it is important to have an understanding of the different types of leases available and the different names by which these lease types go by. 
 
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Open-Ended Lease

(also knows as a Finance Lease, Capital Lease or Capitalized Lease)
  • Choice of the majority of corporations in the United States 
  • Lessee is entitled to the depreciation; the payment is amortized during the lease term and depreciates the book value. If the vehicle is returned with a value different than the depreciated book value, the Lessee keeps/pays the difference 
  • Flexibility in lease structure and the ability to customize 
  • Lessee can lease to own
  • No excess mileage or abnormal wear and tear fees at lease end 
  • Can be an operating lease so does not appear on company financial statement and is generally tax deductible; frees up credit lines and improves financial ratios

Close-Ended Lease

(also known as an Operating Lease or Walkaway Lease)
  • Used most often by individuals in the retail market 
  • Leasing company assumes the depreciation 
  • Preset lease terms with fixed number of monthly payments, mileage limits and set length of operation; no early term without penalty to Lessee 
  • No opportunity to customize 
  • Defined use of vehicle is more difficult to manage 
  • Lessee responsible for all excess mileage and abnormal wear and tear fees 
  • Lessee insulated from fluctuations in used vehicle market
Bergstrom Pioneer Leasing, One Neenah Center, Suite 600, PO Box 549, Neenah WI 54957-0549, Phone (920) 729-5151