Operating Lease (also referred to as Fair Market Value Lease):
This type of lease allows the use of equipment while avoiding a large capital outlay and capital budget constraints. The lessee can acquire valuable equipment without impacting their financial statements or credit lines. It is helpful to compare existing costs (maintenance, supplies, labor) to the new lease payment because it is coming out of the same budget. There is a Fair Market Purchase Option at the end of the lease.
What are the options at the end of a Fair Market Value lease?
-Upgrade existing equipment
-Purchase the equipment for the fair market value
-Return the equipment
-Continue to make lease payment
*Customer should choose Operating Leases (Fair Market Value) when:
-Seeking the lowest monthly payment
-Expecting obsolescence to significantly lower equipment value over time
-Not planning to own the equipment at the end of the term
-Looking for a tax write-off
Capital Lease (also referred to as $1 Buyout Lease):
Customers who prefer to own the equipment at the end of the lease choose this option and costs are included in the capital budget.
*Customer should choose Capital Leases ($1 Buyout) when:
-Expecting to own the equipment at the end of the term
-The equipment will not depreciate significantly over time
-The equipment is highly customized