/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} Problem 18 What is the difference between a... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 8: Problem 18

What is the difference between a closed-end car lease and an open-end car lease?

Short Answer

Expert verified
A closed-end lease allows the lessee to walk away at the end of the term with no obligations (except possible excess usage fees), with the risk of the car's residual value falling on the lessor. In contrast, an open-end lease puts the risk of the car's residual value on the lessee, who may be responsible for extra costs if the car's market value is less than its estimated residual value at the end of the lease.

Step by step solution

01

Definition of Closed-End Lease

A closed-end lease is also known as a 'walk away' lease. In this type of lease, at the conclusion of the lease term, the lessee has the option to simply return the car without any further obligations, except for any overage charges or fees for excessive wear and tear if there are any.
02

Definition of Open-End Lease

An open-end lease is also referred to as a 'finance lease' or 'equity lease'. In this type of lease, the lessee bears the risk of the residual value of the car. At the end of the lease term, if the car is worth less than the estimated residual value, the lessee is responsible for the difference. However, if the car's market value is higher than the estimated residual value, the lessee may benefit by purchasing the car and reselling it.
03

Highlighting Major Differences

The key difference between a closed-end and an open-end car lease lies in who bears the risk of the car's residual value at the end of the lease: With a closed-end lease, the risk is on the lessor, while with an open-end lease, it falls on the lessee. Another major difference is the obligations at the end of the lease: With a closed-end lease, you can simply 'walk away' by returning the leased car, but with an open-end lease, you may responsible for extra costs if the car's market value falls short of the estimated residual value.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Make Sense? In Exercises 25-30, determine whether each statement makes sense or does not make sense, and explain your reasoning. If I purchase a car using money that I've saved, I can eliminate paying interest on a car loan, but then I have to give up the interest income I could have earned on my savings.

In Exercises 25-30, round to the nearest dollar. Suppose that you earned a bachelor's degree and now you're teaching high school. The school district offers teachers the opportunity to take a year off to earn a master's degree. To achieve this goal, you deposit \(\$ 2000\) at the end of each year in an annuity that pays \(7.5 \%\) compounded annually. a. How much will you have saved at the end of 5 years? b. Find the interest.

Suppose that you drive 15,000 miles per year and gas averages \(\$ 3.50\) per gallon. a. What will you save in annual fuel expenses by owning a hybrid car averaging 60 miles per gallon rather than an SUV averaging 15 miles per gallon? b. If you deposit your monthly fuel savings at the end of each month into an annuity that pays \(5.7 \%\) compounded monthly, how much will you have saved at the end of six years?

Suppose that at age 25 , you decide to save for retirement by depositing \(\$ 50\) at the end of each month in an IRA that pays \(5.5 \%\) compounded monthly. a. How much will you have from the IRA when you retire at age 65 ? b. Find the interest.

You would like to have \(\$ 4000\) in four years for a special vacation following college graduation by making deposits at the end of every six months in an annuity that pays \(7 \%\) compounded semiannually. a. How much should you deposit at the end of every six months? b. How much of the \(\$ 4000\) comes from deposits and how much comes from interest?
See all solutions

Recommended explanations on Math Textbooks

Pure Maths

Read Explanation

Geometry

Read Explanation

Mechanics Maths

Read Explanation

Decision Maths

Read Explanation

Applied Mathematics

Read Explanation

Calculus

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.