Estimating the call option values embedded in closed‐end automobile leases

Abstract

Believes that a feature of most closed‐end automobile leases is the right to purchase the car for a specified price at the termination of the lease. This characteristic of a closed‐end autombile lease is similar to a European call option and is transferred to the lessee at no explicit charge. Develops a methodology to calculate the value of the call option feature embedded in closed‐end automobile leases. Concludes that the rational lessee should lease autos that generate low option values.

Citation

White, J.B. (1996), "Estimating the call option values embedded in closed‐end automobile leases", Journal of Consumer Marketing, Vol. 13 No. 3, pp. 19-26. https://doi.org/10.1108/07363769610118930