Vehicle leasing is a popular way to have access to a car for a set period of time without having to buy it. When you lease a car, you are paying an agreed monthly fee for an agreed period of time, usually, two to three years. Several lease options exist, and this blog will help you understand each of them so you can make an informed decision when looking to get a vehicle lease.
Buying vs. Leasing vs. Renting
When you buy a car, all rights and titles to the car become yours. You can rent, sell, or give it away. You can use it as collateral, and there won’t be problems.
When you lease a car, you are only paying to drive it for a certain period of time. It is not yours, and you can’t do as you please with it, as the lease agreement shows just how far your rights to the car goes. At the end of the lease, you can return the car, buy it, or start another lease.
Car rental agreements last for a day or more. They come in handy when you need to attend meetings or when you are on vacation.
Types of vehicle leasing
- Closed-End Lease
Also known as a walk-away lease, a closed-end lease is the most common type of lease. For a closed-end lease, the lessee (the person leasing the vehicle) gets to make monthly payments for a period of time. At the end of the lease, he returns the car to the lessor without further obligation to buy or pay for depreciation.
If the lessee exceeds the agreed mileage and returns the car in bad condition, he’ll have to pay an additional fee.
- Open-End Lease
This is the type of lease agreement where the lessee covers the difference between the estimated value of the vehicle and the market value of the vehicle at the end of the lease term. For example, if the residual value is N80,000 and the market value is N100,000, the lessee will have to pay the difference of N20,000.
Open-end leases offer more flexibility than closed-end leases and are mostly used by commercial companies. It doesn’t have mileage limits, and instead of penalties, these companies cover the depreciation cost.
- Single-Payment Lease
Also called one-pay leaves, this type of lease allows you to make a single payment for the entire lease period. This type of lease benefits people who’d like to avoid making monthly payments. It also helps the lessee to save costs, as they can negotiate a lower fee with the lessor since they are paying up front.
For example, you opt for 24 monthly vehicle leases with payments of N170,000 per month. During the lease, you’ll be expected to pay N2,040,000. But if you negotiate for a single-payment lease where the lessor reduces the monthly charges by N20,000, you’ll make a one-time payment of N1,800,000, saving N240,000.
- Subvented Lease
A subvented lease is a type of lease where the lessor offers incentives to the lessee to reduce his lease payments. These incentives are normally in the form of lower interest rates or lower monthly payments. Subvented leases are offered only to people with good credit scores.
- High-Mileage Lease
A high-mileage lease lets you drive above the allotted number of miles (usually between 10,000–15,000 per year). With a high-mileage lease, your monthly fees are higher, but it is worth it as it is used by people who cover a lot of miles in their day-to-day operations.
Choosing the right type of vehicle lease depends on your personal preferences and financial situation. Before signing a lease agreement, it is important to understand the terms and conditions of the lease and compare the different types of leases available in the market.
At C & I leasing, we can help you get a lease option that will fit your finances. Contact us today to speak to an expert.