Walk-Away Lease (Closed‑End Lease)

A walk-away lease, also called a closed-end or true lease, is a vehicle rental agreement that lets the lessee return the car at the end of the term with no obligation to buy it. The lessor assumes the vehicle’s depreciation risk while the lessee keeps predictable monthly payments as long as lease terms (mileage, wear and tear) are met.

Key points

• Lessee is not required to purchase the vehicle at lease end.
• Lessor carries the depreciation risk; lessee avoids downside depreciation.
• Terms are typically more restrictive (mileage limits, wear-and-tear standards).
• Common consumer lease term: 12–48 months with fixed monthly payments.
• Excess mileage, damage, early termination, or breaking terms can trigger fees.

Closed‑End vs. Open‑End Lease

• Closed‑end (walk‑away): Lessee returns the vehicle and walks away. Predictable payments; less depreciation risk for lessee. Common for consumer leases.
• Open‑end: Lessee may be responsible for the difference between the expected residual value and the vehicle’s actual value at lease end. More flexibility but greater depreciation risk. Often used by businesses or fleet operators.

Benefits

• Predictability: Fixed payments and a known term.
• Simplicity: No requirement to buy at lease end.
• Lower depreciation anxiety: Lessee isn’t responsible if the car loses more value than expected.

Drawbacks

• Mileage limits: Typical caps are 12,000–15,000 miles/year; fees apply for excess miles (often cents-per-mile or tiered charges).
• Wear-and-tear charges: Lessee pays for damage beyond normal use.
• Early termination fees: Ending the lease early is usually costly.
• Possible tiered or graduated penalty structures that can increase costs unpredictably.

Typical lease structure

• Capitalized cost (vehicle price) and residual value (expected end value) determine monthly payments.
• Fixed interest (money factor) and term length set payment schedule.
• Mileage allowance and wear-and-tear standards are specified up front.
• At lease end the lessor sells the vehicle; the lessee may be offered the buyout option (residual value), which can be attractive if market value is higher than the residual.

Example (simplified)

If a new car costs $20,000 and the expected residual is $10,000, lease payments are set assuming that $10,000 depreciation.
Open‑end: If actual value at lease end is $4,000, the lessee might owe the lessor the $6,000 shortfall.
Closed‑end: The lessee returns the car and generally pays no depreciation shortfall — unless they exceeded mileage limits or caused excess damage.

Practical tips before signing

• Confirm allowed annual mileage and per‑mile penalty for overages.
• Inspect the vehicle regularly and document condition to avoid disputed wear‑and‑tear charges.
• Consider gap insurance to cover insurance payout shortfalls if the car is totaled.
• Negotiate the capitalized cost (purchase price) and ask about acquisition, disposition, and termination fees.
• Ask about the residual value and the buyout price if you might want to purchase the car at lease end.
• Understand early termination costs and how end‑of‑lease inspections are handled.

A walk‑away (closed‑end) lease offers predictable payments and the convenience of returning a vehicle without buying it, but it requires careful attention to mileage and condition limits to avoid extra charges.