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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
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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