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Canadian Financial, Real Estate and Mortgage Glossary
How often this word is used
50% - Moderately
50% - Moderately
|Synonyms:||closed-end, contract, rental|
|Filed Under:||automotive, financial-banking|
|Tags:||automotive, banking, lease|
Definition of walk-away lease
- walk-away lease
- 1. The most common type of vehicle lease where the lessee may return the vehicle at the end of the lease term, pay any end-of-lease costs, and the lease agreement is finished.This type of lease is also known as a closed-end lease. With this type of lease the lender assumes the risk of predicting the value of the vehicle (residual value) at the end of the lease term. Closed-end lease payments are somewhat higher than open-end lease payments.
Related Terms and Acronyms:
- amount due at lease signing The total amount due before the consumer can take delivery of a leased vehicle. It can include any security deposit, title fee, capitalized cost reduction, monthly payments paid at signing and registration fees.
- closed-end lease The most common type of car lease. The lessee may return the car at the end of the lease term, pay any end-of-lease costs, such as the disposition fee, and the lease agreement is over. In a closed-end lease, the lender assumes the risk of predicting the value of the vehicle (its residual value) at the end of the lease's term. Closed-end lease payments are somewhat higher than open-end lease payments.
- disposition fee A fee charged by some lessors at the end of a lease where the customer pays for the privilege of returning the vehicle.
- lease (lse) A written agreement in which the property owner allows a tenant to use property in exchange for rent, and for a specified period. Or, a written agreement in which a car dealer allows a consumer to use a vehicle in exchange for payments for a specified period.
- mileage allowance The number of miles, specified in a lease, that a car may be driven over the life of the lease.
- money factor A leasing term that expresses the cost of borrowing. It is similar to the interest rate paid on a conventional car loan, but it is expressed as a difficult-to-understand fraction. To convert the money factor to a recognizable interest rate, multiply it by 24. For example, a money factor of .00345 x 24 = 9 percent interest. The money factor is negotiable, and consumers who lease a new car should look for a money factor close to the current interest rate charged for new-car loans.
- negative-equity financing Financing for new car buyers who owe more on their trade-in than the car is worth.
- open-end lease Sometimes called a finance lease. It usually offers lower payments, but carries a risk for the consumer. Under an open-end lease, the lessee must pay any difference between the residual value of the car as stated in the lease and the fair market value of the car, if lower, at the end of the lease. The lessor pays for the appraisal that sets the value. If the consumer doesn't agree with it, the consumer may pay for a binding, independent appraisal by someone agreed to by both parties.
- options Also known as add-ons. These are features added to the car often by the dealer such as a CD stereo, anti-theft system, detailing and undercoating. Some items are purely decorative, known as "mop and glow," and do not add any value to the car.
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