Automotive Leasing for Executives Key Terms

Learn the lingo of auto leasing and save time and money

Transportation costs can be a substantial part of your business’ bottom line. Before you sign on the dotted line, it's important to understand exactly what is included in the lease and what you can expect to pay. It is likely that the company you work for will have an established contract that they use, but you can make modifications and negotiate terms on certain parts of the lease. To do this, it is important to understand the terminology used by the dealer.

 

Open-end lease

In an open-end lease, the leasing company determines the value of the car at the end of the lease. The company that has held the lease on the car pays any difference between the actual value of the car and the pre-determined value of the car. These leases are relatively common and make more sense in the business world, but it is important to understand that your company may end up owing quite a bit of money at the end of the leasing term.
Try: Check out Automotive.com for more information on whether an open-end lease makes sense for your company.

Closed-end lease

A closed-end lease doesn't leave you with any unexpected expenses at the end of the leasing period. You will be responsible for any charges due to excessive mileage or wear and tear, however. Individual lessees often purchase the vehicle at the end of the lease period, rather than pay these fees. Commercial leasers, however, are typically ready for new vehicles.
Try: Edmunds.com explains the pros and cons of a closed-end lease in detail.

Specialized corporate leasing firms

One way to lease a fleet of company vehicles is through your local automobile dealer. Many companies find that this is a time consuming process, and prefer to use someone who specializes in working with businesses. A specialized corporate leasing firm can arrange to deliver the vehicles to your place of business. Many specialized corporate leasing firms also provide additional services, such as automatic service reminders and other fleet management tools.
Try: Merchants Leasing is one specialized leasing firm that offers a range of services to companies. Review their philosophy to better understand what specialized corporate leasing firms can offer.

Lease swaps

Even with careful research, all automotive leases don't work out. Maybe business is down and you have to cut back expenses. Perhaps the vehicle you leased is not heavy-duty enough for the work it's required to do. Lease swaps allow you to trade in a vehicle for one that is better suited to your needs, without losing money by ending the lease contract early.
Try: Review LeaseTrader.com for information and tools on how lease swapping works.

Vehicle remarketing

When you turn a car in at the end of the leasing period, it is typically sold. Many leasing firms will use a process called vehicle remarketing to help save you money. After they sell the vehicle, they will determine the difference between the amount that you owe for wear and tear, mileage and other depreciation costs, and the amount that the vehicle sold for. You may end up owing nothing, or even getting a check in the mail.
Try: Gain insight on vehicle remarketing by reviewing techniques Walter Leasing employs to get the best return on your money.

Early termination charge

What happens if you need out of a lease? It is critical to ask this question up front. Most leases have an early termination charge built into the contract. If a business wants out of a lease agreement, it may be because of the need for some belt tightening. If that's the case, you don't want to be stuck with hidden expenses.
Try: The Federal Reserve Board provides more information on early termination charges for both closed- and open-ended leases, including what is permitted by law and what is not.

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