Question

What is the difference botween a closed-end car lease and an open-end car lease? Choose the correct answer below.

A. For a closed-end lease, each month, the lessee makes a fixed payment based on the car's residual value. When the lease ends, the lessee returns the car and makes a payment based on its appraised value at that time compared to its residual value. For an open-end lease, oach month, the lessee makes a fixed payment based on estimated usage. When the lease ends, the lessee returns the car and pays for mileage in excess of the estimate.
B. For a closed-end lease, each month, the lessee makes a fixed payment based on estimated usage. When the lease ends, the lessee returns the car and pays for mileage in excess of the estimate. For an open-end lease, each month, the lessee makes a variable payment based on estimated usage. When the lease ends, the lessee returns the car and pays for mileage in excess of the estimate.
C. For a closed-end lease, each month, the lessee makes a fixed payment based on estimated usage. When the lease ends, the lessee returns the car and pays for mileage in excess of the estimate. For an open-end lease, each month, the lessee makes a fixed payment based on the car's residual value. When the lease ends, the lessee returns the car and makes a payment based on its appraised value at that time compared to its residual value.

Answer 1

A closed-end car lease involves fixed payments based on residual value, while an open-end lease involves fixed payments based on estimated usage.

Step-by-step explanation:

The correct answer is:

For a closed-end lease, each month, the lessee makes a fixed payment based on the car's residual value. When the lease ends, the lessee returns the car and makes a payment based on its appraised value at that time compared to its residual value.

For an open-end lease, each month, the lessee makes a fixed payment based on estimated usage. When the lease ends, the lessee returns the car and pays for mileage in excess of the estimate.

In a closed-end car lease, the lessee makes a fixed payment each month based on the car's residual value. When the lease expires, the lessee returns the car and may have to make a payment if the appraised value at that time is lower than the residual value. On the other hand, in an open-end car lease, the lessee also makes a fixed payment each month, but it is based on estimated usage. When the lease ends, the lessee returns the car and pays for any mileage in excess of the estimate.