Open Vs CLosed end Leases.

First off, let me explain "open end lease"--its advantages--and its limitations...
An "open end" lease is a "NO KILOMETER RESTRICTION" lease. In other words, you are not going to be penalized for having an excessive amount of kilometers on the vehicle's odometer at the expiry of the lease....BUT...
you are guaranteeing the residual value (buy-out amount) during the term of the lease, and more importantly at the expiry of the lease.

For example, if you have an "open end" lease and your residual value on the lease document is $10,000, you are guaranteeing that the VEHICLE will be worth at least $10,000 at the end of the lease.

Now you have three different options to choose from at all times when you lease a vehicle in an "open end" lease

1. Buy it.
2. If you decide not to purchase the vehicle,and the vehicle is only worth $9,000 at the end of the lease, then you would have to pay the difference between the residual value ($10,000) and the value of the vehicle ($9,000). In this particular instance, you would have to pay $1,000 + GST and PST ($1140).
3. If you decide not to purchase the vehicle, and the vehicle is worth more, let's say $12,000, the leasing company would cut you a cheque for $2,000 or you could use the $2,000 as a cost reduction on a new lease.

Okay, so now you've got the idea--let's move on to the "closed end" lease and it's advantages and limitations...
A "closed end" lease is quite different. It is a "KILOMETER RESTRICTED" lease with an "OPTIONAL BUYOUT" at the lease expiry. The kilometer restriction can vary, with the industry norm being anywhere from 15,000 kms. to 30,000 kms per year. If you drive in excess of this amount over the term of the lease, (and you do not wish to use your option to purchase), you pay a penalty. The penalty amount varies. Again the industry norm is anywhere from 5 cents to 15 cents per kilometer (BE CAREFUL) that you have driven over your allowance.
For example, if you have a 48 month lease (4 year) with a 20,000 kms per year restriction, you may put 80,000 kms on the odometer without paying a penalty. If at the end of the lease you have 100,000 kms on the odometer, and the kilometer restriction penalty is $.08 per kilometer, you would pay $1600 (20,000 X $.08) plus GST & PST. You will also be responsible for "DAMAGE TO THE VEHICLE ABOVE AND BEYOND NORMAL WEAR & TEAR."
This includes the following: cigarette burns, tears, stains, dents, large scratches, etc. as well as brake pads (if they are less than 20% remaining), brake rotors if they are worn, windshield wiper blades and any non-warranteed part that is broken or not working...BE CAREFUL--IT CAN ADD UP!

If you decide to purchase the vehicle at the end of the "closed end" lease, and the residual value is $10,000, then you pay no penalty whatsoever and you purchase the vehicle for $10,000 + GST & PST

Now, as far as which lease is better...
...it depends on several factors. Both have the same taxable benefits. If you are putting money down as a cost reduction, the "open end" lease is better. The buyouts are generally lower. Because of this, you are more apt to get your equity down payment back at the end of the lease. For example, you put $3,000 down at the start of the lease. Your buyout is $10,000. The vehicle is worth $13,000 and you decide not to buy it out. The leasing company would cut you a cheque for you equity--in this case $3,000. If it was a "closed end" lease and the buyout was $12,000, the leasing company would generally take the vehicle back and cut you a cheque for $1,000 (less any kilometer or damage penalties)

The "open end" lease is less penalty oriented, BUT BE CAREFUL of the "HIGH BUYOUT" "open end" lease...
REMEMBER YOU ARE GUARANTEEING THAT RESIDUAL VALUE
In a nutshell, the "closed end" lease is better for someone who treats their vehicles well and keeps them in good condition, does not do an excessive amount of driving, wants lower payments (this varies) and does not intend to build equity or purchase the vehicle at the expiry of the lease.