Examples: Early Termination
Examples 1 - 3 illustrate the early termination of a 60-month (5-year) lease versus a 60-month (5-year) loan. Example 1 illustrates the life cycle of a 60-month lease. It represents the typical situation in which the value of the vehicle turns out to be less than the residual value when the lease ends. Example 2 illustrates the life cycle of a 60-month loan for the same vehicle. Example 3 compares a 60-month lease with a 60-month loan. Note that the loan balance is reduced much faster than the lease balance because the monthly payment is $122.95 higher. At 36 months, the value of the vehicle equals the loan early termination balance. However, there is still a $4,500 deficiency on the lease (the difference between the lease balance and the vehicle's value). The value of the vehicle does not equal the lease balance even at month 60. You generally lose the protection of the closed-end lease (no responsibility for unexpected depreciation in the used-car market) if you terminate early.