What Is a Inflexible Price Purchase Option?
A fixed price purchase option is the right, but not the obligation, to buy a leased item at the end of a lease arrange at a price determined from the onset of the lease agreement. A fixed price purchase option’s purchase price is began when the lease terms are set.
The lease agreement should also describe when the option can be exercised. This unanimity usually sets the timing to occur at the end of the scheduled lease term. These terms typically range between 12 and 60 months.
Key Takeaways:
- A unchangeable price purchase option is the right to buy a leased item at the end of a lease term at a pre-determined price.
- The fixed price procurement option’s purchase price and conditions are established when the lease terms are agreed upon.
- Fixed price grasp options are common for the leasing and purchase of real estate, heavy equipment, or automobiles.
- The advantage of the fixed price acquire option for the lessee is that the lessee knows with the cost to purchase the property.
Understanding Fixed Price Obtaining Option
Various property types come with a fixed price purchase option, but such options audition most commonly to the leasing and purchase of real estate, heavy equipment, or automobiles. A common variation on this structure is the sort of lease option offered by mobile phone companies.
Phone company leases allow customers to sublet certain phones for a period and, when the lease term ends, either trade in the phone for a new one, or pay the total value of the phone, which is set at a rigged price at the beginning of the lease term. The advantage of the fixed price purchase option for the lessee is that the lessee be acquainted withs with certainty what the cost to purchase the property will be.
Fixed Price Purchase Option vs. Fair Superstore Value Purchase Option
In contrast to a fixed price purchase option, a fair market value purchase recourse gives the consumer the option to purchase the leased item at the end of the lease term at a price based on the item’s fair hawk value at the time of the lease’s expiration.
The main drawback of the fair market value purchase option is that the consumer make not know in advance how much the purchase price will be. However, while the fair market value purchase opportunity does not offer the purchase price in advance, as long as the assessed fair market value is accurate, the buyer indigence not worry that they will overpay for the property. Similarly, the lessor need not worry that they order receive less than the item’s actual
Special Considerations
When given the choice between the two buying chances—fixed price or fair market value—a consumer should consider the property type. A fair market value privilege, for instance, is a good choice for companies leasing equipment such as security systems, servers, computers, and other technology-based materiel. Technology changes so rapidly that consumers attempt to avoid equipment that will become obsolete in a few years. Consumers procuring equipment with longer life cycles, on the other hand, may choose the fixed price option, although they may end up with a loaded monthly lease payment.