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Purchase Option or Buyout
Buyout/Purchase options are determined before the lease begins. They outline your final financial obligations at the end of the lease. The following will give you a complete description of what those options are, and how they will affect you.
10% Buyout
With this contract, at the end of the lease term you are obligated to purchase the equipment for 10% of its original purchase price.
A 10% Purchase Option or Put end of lease payment is generally determined at the inception of the lease as either a fixed percentage of the equipment cost or a specified dollar amount. With this option, you must pay the Fixed Put. It is considered a final payment in most cases. The Fixed Put is beneficial if you would like a lower monthly payment and are not concerned about making an additional payment at the end of lease.
$1 Buyout
The customer purchases the equipment for $1 at the end of a capital lease and the equipment title is then transferred from Walker Finance to the customer.
The benefit of a $1 Buyout is that the final payment is only a dollar. This generally comes at the expense of a higher monthly payment and a smaller tax benefit.
Fair Market Value (FMV) Purchase Option
Purchase the equipment for its then Fair Market Value, or return the equipment at the end of term.
Some advantages of the Fair Market Value option include open-ended terms, lower monthly payments and a greater tax benefit than with other buyout options. As well, if your equipment depreciates rapidly, this is by far the best option.
Some disadvantages of this purchase option is that it can be somewhat ambiguous and result in a valuation that is high. Walker Finance generally negotiates this value with our customers at the end of the lease.
For additional information contact:
Dan Kuebler
336-731-5288
dan.kuebler@walkerfirst.com
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