BROWSE

Walk-Away Lease

What is 'Walk-Away Lease'

A common type of car lease in which the lessee returns the car at the end of the lease period, ending the lease agreement. The lessee bears very little risk under this type of lease agreement because the total costs of ownership (minus maintenance and repair costs) are known in advance. In other words, the lessee does not bear the risk of selling the vehicle at the current market price when the lease is over.

Explaining 'Walk-Away Lease'

On a walk-away lease, the lender assumes the risk of predicting what the residual value of the car will be at the end of the lease period. The predicted residual value is not only an important consideration in establishing an appropriate amount to charge for lease payments, it ultimately determines how much profit the lender earns on the lease of a vehicle. Ideally, the total value of all lease payments in conjunction with the vehicle's residual value should be greater than the cost paid for the vehicle.


Further Reading


FAS No. 8--Does it distort financial statements?
search.proquest.com [PDF]
… through use of the borrow— ings to invest in property to be sub— sequently leased under a … To the extent the debt is solely collateralized in the lease property, without recourse otherwise, the parent has the prac- tical alternative to turn its back and walk away and thereby to …

Economics of automobile leasing: The call option valueEconomics of automobile leasing: The call option value
onlinelibrary.wiley.com [PDF]
… through use of the borrow— ings to invest in property to be sub— sequently leased under a … To the extent the debt is solely collateralized in the lease property, without recourse otherwise, the parent has the prac- tical alternative to turn its back and walk away and thereby to …

Rationales for real estate leasing versus owningRationales for real estate leasing versus owning
www.aresjournals.org [PDF]
… through use of the borrow— ings to invest in property to be sub— sequently leased under a … To the extent the debt is solely collateralized in the lease property, without recourse otherwise, the parent has the prac- tical alternative to turn its back and walk away and thereby to …

Taxation and corporate financial policyTaxation and corporate financial policy
www.sciencedirect.com [PDF]
… through use of the borrow— ings to invest in property to be sub— sequently leased under a … To the extent the debt is solely collateralized in the lease property, without recourse otherwise, the parent has the prac- tical alternative to turn its back and walk away and thereby to …

Income Tax-Three-Party Sale-Leasebacks-True Leases or Financing TechniquesIncome Tax-Three-Party Sale-Leasebacks-True Leases or Financing Techniques
heinonline.org [PDF]
… through use of the borrow— ings to invest in property to be sub— sequently leased under a … To the extent the debt is solely collateralized in the lease property, without recourse otherwise, the parent has the prac- tical alternative to turn its back and walk away and thereby to …

Vehicle acquisitions: leasing or financing?Vehicle acquisitions: leasing or financing?
onlinelibrary.wiley.com [PDF]
… through use of the borrow— ings to invest in property to be sub— sequently leased under a … To the extent the debt is solely collateralized in the lease property, without recourse otherwise, the parent has the prac- tical alternative to turn its back and walk away and thereby to …

Lease or purchase? A spreadsheet analysisLease or purchase? A spreadsheet analysis
search.proquest.com [PDF]
… through use of the borrow— ings to invest in property to be sub— sequently leased under a … To the extent the debt is solely collateralized in the lease property, without recourse otherwise, the parent has the prac- tical alternative to turn its back and walk away and thereby to …

Investigation of Leasing In Asset Financing: A Case Study of Investment Companies Listed At Nairobi Securities ExchangeInvestigation of Leasing In Asset Financing: A Case Study of Investment Companies Listed At Nairobi Securities Exchange
erepo.usiu.ac.ke [PDF]
… through use of the borrow— ings to invest in property to be sub— sequently leased under a … To the extent the debt is solely collateralized in the lease property, without recourse otherwise, the parent has the prac- tical alternative to turn its back and walk away and thereby to …



Q&A About Walk-Away Lease


What is a walk-away lease?

A walk-away lease is a type of car lease in which the lessee returns the car at the end of the lease period, ending the lease agreement.

Who bears very little risk under this type of lease agreement?

The lessee bears very little risk.

How should total value of all payments and residual value be greater than cost paid for vehicle on a walk-away lease?

Ideally, they should be greater than cost paid for vehicle.

What determines how much profit a lender earns on a vehicle leased to another party?

The predicted residual value.