Fair Market Value (FMV)
A type of lease where the lessee can purchase the equipment at the end of the lease term for its fair market value, typically 10-15% of original price.
Detailed Explanation
Fair Market Value leases are the most common type of copier lease, offering lower monthly payments than $1 buyout leases because the lessor expects to recover residual value at lease end. With FMV leases, you have three options at lease end: (1) Return the equipment with no further obligation, (2) Purchase it for its fair market value (usually 10-15% of original cost), or (3) Renew/upgrade to new equipment. FMV leases work well if you plan to upgrade regularly, as they avoid equipment ownership and disposal. The "fair market value" is determined by the lessor and may be negotiable. FMV leases typically offer the lowest monthly payments, making them attractive for businesses that want to upgrade every 3-5 years without buying equipment. However, if you plan to keep equipment long-term, a $1 buyout lease may cost less overall. Always clarify: What is the estimated FMV? Is it negotiable? Are there return shipping costs?
Examples
- $20,000 copier, 10% FMV = $2,000 buyout
- Monthly payment: $400 (FMV) vs $480 ($1 buyout)
- Return equipment: $0 additional cost
- Purchase at FMV: Negotiate 8-12% of original price
Related Terms
Lease Factor (Money Factor)
A decimal number used to calculate monthly lease payments, similar to an interest rate but expressed differently.
Residual Value
The estimated value of leased equipment at the end of the lease term, affecting monthly lease payments.
TCO (Total Cost of Ownership)
The complete cost of owning a copier, including purchase price, supplies, maintenance, and energy costs over its lifetime.
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