Also known as terminal rental adjustment clause (TRAC) leases, these are usually more popular with commercial vehicles, thanks to their short terms and lack of mileage restrictions. This is because you, and not the business car leasing company, are responsible for depreciation, often termed as the residual value of the vehicle. Since your business has to account for any depreciation, your vehicle can be used just as it is needed.
Closed ended leases:
This option may be more popular with individuals, but it can also prove to be quite handy for commercial use. These involve fixed monthly payments, fixed terms and mileage restrictions. Unlike the previous one, in this case you won’t have to bear the cost of depreciation. Also, unless you choose to purchase the vehicle at the end of the lease term, you can put all worries to rest with regard to how much or how little the car is worth.
However, it also suffers from a drawback; since it usually lasts anywhere between 3 to 5 years, you cannot get rid of the vehicle throughout the length of the term, unless you opt to end the lease early, which can incur a significant fee. Also, since there is a mileage limit involved, you will have to pay if you go over.
If you intend to use your corporate vehicle semi-regularly, a close-ended lease may be more appropriate. However, it is interesting to note that businesses that plan to use their vehicles regularly may not get the best deal out of this type of contract.