Question

Jacob has taken an SUV on lease from Free Cruisers Inc. for a period of 4 years. Jacob does not need to pay any extra amount when he turns in the vehicle because he didn’t exceed the mileage specified in the lease and the SUV is not damaged. He has a: a. closed-end lease. b. residual lease. c. purchase option lease. d. right to early termination lease.

Answer 1

a. closed-end lease

Step-by-step explanation:

This lease is typical of a 4 year (48 months) lease period. A closed-end lease puts no obligation on the person leasing the vehicle, in terms that he/she does not have to purchase the vehicle at the end of the leasing period.

Also, if the lessee (the person using the vehicle) adjusts to the contracted mileage limit, he/she does not have to pay additional fees at the end of the leasing period.

Thus, Jacob has a closed-end lease agreement on his SUV.