Types of Leases

• A closed-end lease does not require the consumer to pay any additional end-of-lease costs if the market value of the car at the end of the lease is less than the residual value that was projected at the beginning of the lease. An open-end lease, however, may require a payoff amount of any difference between the market value and the residual value.
  
  

Depreciation

• If the car depreciates more quickly than expected during the term of the lease, the actual value may be lower than the residual value. This could occur due to excessive mileage or wear and tear on the vehicle or decreased market demand for that vehicle. The opposite situation could also occur: A refund may be issued if the actual value of the car is more than the residual value.
  
  

Protections

• Under the Consumer Leasing Act, the payment amount required at the end of an open-end lease cannot exceed three times the average monthly payment. For example, if the monthly lease payment was $200, the residual payment cannot be more than $600, even if the difference between the actual and residual values exceeds $600.