Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Closed-End Lease

What it is:

Also called a walk-away lease, a closed-end lease is usually a kind of car lease that allows the lessee to return the car at the end of a lease period.

How it works (Example):

Let's assume John Doe leases a 2013 Ford Mustang. The lease term is two years. During those two years, John must keep the car in good condition and not exceed, say, 25,000 miles. For this, John pays $450 a month.

At the end of the two years, John simply drives to the dealership, hands over the keys, and walks away (or, more likely, leases another car).

Why it Matters:

Closed-end leases are advantageous to lessees because they know how much it's going to cost to lease and take care of the car. The lessee doesn't have to worry about how much the car's value will be when it comes time to sell the used car -- that's a risk the lessor has to bear (and the lessor will factor that risk into the lease payments it charges the lessee in the first place).

Related Terms View All
  • Auction Market
    Though most of the trading is done via computer, auction markets can also be operated via...
  • Best Execution
    Let's assume you place an order to buy 100 shares of Company XYZ stock. The current quote...
  • Book-Entry Savings Bond
    Savings bonds are bonds issued by the U.S. government at face values ranging from $50 to...
  • Break-Even Point
    The basic idea behind break-even point is to calculate the point at which revenues begin...
  • Calendar Year
    If Company XYZ starts its fiscal year on January 1 and ends its fiscal year on December...