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All Leases are NOT Created Equal

To know the difference in leases and why some leases had such a bad name you must reach back several years to the time before various lease acts came along to protect the general public.

In the ‘70s there were basically two kinds of leases. The closed end and the open end lease. The difference was dramatic and the purpose was ill defined. The “closed”, in the closed end lease, applied to the lessee. It meant that the lessee had virtually no control over the lease except to pay the monthly payments, and at the end of the lease the lessor could hold you responsible for everything from damage to mileage, and worst of all, the value of the car. The residual was not guaranteed and you could be billed for the deficiency. You did not, in many cases, have the right to sell the vehicle on your own. The open end lease meant just the opposite. It meant the options were “open” to the lessee, very similar to the leases written today.

The terms are now reversed, and the "closed end lease" is what is generally considered a consumer auto lease. Both leases exist today, but you would have to work pretty hard to stumble into an open lease offering for something other than equipment leasing.

We will not concern ourselves with “open end” leasing any further. Just understand that they exist and you would probably NEVER want one.

1998 the Consumer Protection people stepped in and revised Regulation M of the Federal Consumer Leasing Act. This set certain guidelines to which must be adhered. It's boring reading, but some very important issues were settled, such as "non-disclosed leases". Read it when you have the time.

 

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