When it comes to getting a new vehicle, there are two options: You can either purchase your next vehicle, or you can lease it. If you opt for the latter, you are left with two more choices: a closed-end lease, or an open-end lease.
The majority of auto leases are of the closed-end variety. In a closed-end lease, you agree to a certain lease length, and when the lease is over, you are no longer responsible for the vehicle or for paying any money. In an open-end lease, however, you keep the vehicle after your lease has ended. When the terms of your lease have finished, you owe what is called a “balloon payment.” The balloon payment is the difference between the predetermined price of the vehicle (this price is set when you agree to the lease), and the amount that you have already paid off through the lease. In other words, an open-end lease is leasing to own with the price set before the lease begins rather than after it ends.
There are negatives and positives to an open-end lease. On the positive side, an open-end lease allows you to keep your vehicle after your lease has ended, which means that you get to truly own the car, which is comforting to many drivers. It also can be financially beneficial: If you keep the value of the car high, then your balloon payment may end up being significantly lower than what the vehicle is actually worth.
On the negative side, an open-end lease means that you will lose money on the vehicle should the value substantially decrease, and it also puts you on the hook for a much larger amount of money than a closed-end lease. Rather than beginning a new lease with a brand new vehicle, you’ll have to pay off your car when an open-end lease reaches completion.
An open-end lease may be right for you. If it is, follow these simple instructions to obtain one.
Part 1 of 3: Choosing your vehicle
Step 1: Make a list of potential vehicles. Select a few models that you are interested in purchasing.
Do some research to compile this list. You can use websites such as Kelley Blue Book to determine what vehicles and what features are in your price range.
Step 2: Test drive some potential vehicles. Test drive the cars that you’re considering.
After you’ve selected the cars that you’re interested in, head to the dealerships to ask for a test drive.
Step 3: Ask about pricing. While at the dealerships, ask about prices for the models you liked.
- Tip: Don’t mention that you’re planning on leasing the vehicle. If a car salesperson knows that you are planning on leasing, they will likely give you a higher price than if you are buying the car outright.
Step 4: Decide on a vehicle. After getting price estimates and test driving the cars that you’re interested in, you’ll be able to make a decision on which particular vehicle you would like to purchase.
Part 2 of 3: Negotiating an open-end lease
Step 1: Talk with a salesperson. Talk with a salesperson to try and negotiate a fair price for the vehicle you would like to buy.
Negotiate with the salesperson to see if you can bring down the price at all, but don’t ever let them raise it from the price that they originally offered.
After deciding on a car and price, tell the car salesperson that you would like to sign an open-end lease.
- Tip: If you’re unable to reach a good price or a good open-end lease deal for your first option, try going to another dealership or inquiring about your second choice.
Step 2: Agree to lease terms. Come to terms on an open-end lease.
After settling on a total price, you and the car salesperson will have to agree to lease terms, which will include your down payment amount, as well as your monthly lease payment.
Step 3: Complete the paperwork. After you’ve agreed to the lease terms, follow the instructions of the dealership and sign all of the necessary paperwork.
- Tip: If you can afford it, it’s worth negotiating for a high down payment. The more you pay upfront, the less you’ll have to pay further down the road, which offers you some future financial protection.
Part 3 of 3: Retaining the value of your vehicle
With an open-end lease, you’re agreeing to a set price for the vehicle before you begin leasing the car. Therefore, when your lease is up and you officially own the car, you want it to have retained as much value as possible, so that you’re getting a good deal and can sell the car for as much as possible if you so choose.
Step 1: Limit your mileage when possible. You want to keep the mileage on the leased vehicle as low as is possible.
The best way to retain your leased vehicle’s value is to keep the miles as low as possible. If you have another car, make sure that you do some of your driving in that one as well. Consider taking public transportation to work to limit the miles that accumulate on your vehicle. And if you’re going on a long drive, think about renting a car.
Step 2: Keep your car well maintained. Perform the regularly scheduled maintenance for your vehicle consistently.
In order to keep your car’s value high, be sure to follow the suggested maintenance plan. Always get your oil changed on time, get your tires changed frequently, and keep up with other basic maintenance as well. Be sure to have a comprehensive inspection performed regularly. If you have any questions about your particular vehicle’s maintenance schedule, you can look up your car to find out more about when your car needs to be serviced.
The better you maintain your vehicle during the leasing years, the better shape it will be in when the lease is up and you own the car. This not only maintains the car’s value, but it also lowers the amount of money you will have to spend fixing issues later on.
An open-end auto lease isn’t right for everyone, but it’s perfect for many people. If it seems like the right automotive and financial decision for you, simply follow these steps and you’ll be able to find the open-end lease that fits your needs. And if you have any questions at all about the vehicle you’re thinking of buying, you can hire a mobile mechanic from YourMechanic to perform a pre-purchase inspection for you.
This article originally appeared on YourMechanic.com as How to Get an Open-End Lease for Your Next Car and was authored by Brady Klopfer.