Compare FMV to $1 Buyout

Fair Market Value Lease (FMV) $1 Purchase Option Lease Characteristics Lease term shorter than asset's expected useful life Customer uses asset for a portion of its useful life in exchange for rental payments Ownership retained by Lessor for tax purposes Lease term spans 75% or more of asset's expected useful life Customer uses asset for most of its useful life Customer owns asset at end of lease, provided all lease terms have been fulfilled Benefits Lower monthly payments (even lower than a traditional loan) Simplest accounting Hedge against technology changes Upgrade flexibility Improves financial statements by protecting liquidity ratios and reducing debt leverage Preserves capital budgets and avoids internal approval processes Ownership at end of lease term Fixed, predictable cost At End of Lease Term      Customer may: Purchase asset for its Fair Market Value Return asset Replace asset with new asset under a new lease Extend/renew the lease term      Customer may: Purchase the equipment for $1 Tax Implications Customer can deduct lease payments as a business or operating expense Customer can claim depreciation and interest expense deduction (similar to a purchased asset) Potential Customer Profile Looking for lowest possible lease payments Acquiring equipment which quickly becomes obsolete Concerned more about obsolescence than ownership Wants maximum tax advantages Acquiring asset which will not become obsolete quickly Wants to own the equipment