What is a Dollar Option Lease?

A dollar option lease, often referred to as a "$1 buyout lease," is a type of equipment lease agreement where the lessee has the option to purchase the equipment for a nominal amount (typically $1) at the end of the lease term. This structure is common in leasing agreements for equipment and can be appealing for businesses that want to own the equipment after the lease period.

What is a FMV Lease?

A "FMV lease," short for "Fair Market Value Lease," is a type of equipment lease agreement that includes a purchase option for the lessee to buy the equipment at its fair market value (FMV) at the end of the lease term. Here’s a closer look at what this entails. At the end of the lease term, the lessee has the option to purchase the equipment for its fair market value. The FMV is the estimated price that the equipment would sell for on the open market. Monthly lease payments are generally lower compared to leases with a nominal purchase option (like a $1 buyout lease) because the equipment is expected to be purchased at its FMV at the end of the term. The lessee has the flexibility to choose whether or not to purchase the equipment based on its condition and market value at the end of the lease. Lease payments may be fully deductible as a business expense, and the FMV purchase option can allow for better financial planning and tax strategies.

What is a FPO Lease?

A fixed purchase option lease is a type of equipment lease agreement where the lessee (the person or business leasing the equipment) has the option to buy the equipment at a predetermined, fixed price at the end of the lease term. This fixed price is agreed upon at the beginning of the lease and does not change, regardless of the equipment's fair market value at the end of the lease term. Because the lease payments are structured with the expectation that the equipment will be bought for the fixed price at the end, the monthly payments are often lower compared to leases where the purchase option price is tied to the fair market value. The fixed purchase price provides clarity on the total cost of the equipment, allowing for easier budgeting and financial planning.