Fixed Price Purchase Option
What Is a Fixed Price Purchase Option?
A fixed price purchase option is the right, however not the obligation, to buy a leased thing toward the finish of a lease term at a price determined from the onset of the lease agreement. A fixed price purchase option's purchase price is laid out when the lease terms are set.
The lease agreement ought to likewise depict when the option can be worked out. This agreement for the most part sets the timing to happen toward the finish of the scheduled lease term. These terms commonly range somewhere in the range of 12 and 60 months.
Understanding Fixed Price Purchase Option
Different property types accompany a fixed price purchase option, yet such options apply most commonly to the leasing and purchase of real estate, heavy equipment, or automobiles. A common variation on this arrangement is the kind of lease option offered by mobile telephone companies.
Telephone company leases permit customers to lease certain telephones for a period and, when the lease term closes, either trade in the telephone for another one, or pay the total value of the telephone, which is set at a fixed price toward the beginning of the lease term. The advantage of the fixed price purchase option for the lessee is that the lessee knows with certainty what the cost to purchase the property will be.
Fixed Price Purchase Option versus Fair Market Value Purchase Option
Rather than a fixed price purchase option, a fair market value purchase option gives the consumer the option to purchase the leased thing toward the finish of the lease term at a price in light of the thing's fair market value at the hour of the lease's expiration.
The principal drawback of the fair market value purchase option is that the consumer won't be aware in advance how much the purchase price will be. Nonetheless, while the fair market value purchase option doesn't offer the purchase price in advance, as long as the assessed fair market value is accurate, the buyer need not worry that they will overpay for the property. Essentially, the lessor need not worry that they will receive not exactly the thing's genuine value.
Special Considerations
At the point when given the decision between the two buying options — fixed price or fair market value — a consumer ought to consider the property type. A fair market value option, for example, is a decent decision for companies leasing equipment like security systems, servers, PCs, and other technology-based equipment. Technology changes so quickly that consumers endeavor to keep away from equipment that will become obsolete in a couple of years. Consumers buying equipment with longer life cycles, then again, may pick the fixed price option, despite the fact that they might wind up with a higher month to month lease payment.
Features
- Fixed price purchase options are common for the leasing and purchase of real estate, heavy equipment, or automobiles.
- The fixed price purchase option's purchase price and conditions are laid out when the lease terms are agreed upon.
- The advantage of the fixed price purchase option for the lessee is that the lessee knows with the cost to purchase the property.
- A fixed price purchase option is the right to buy a leased thing toward the finish of a lease term at a pre-determined price.
