FMV Lease or Dollar Out Lease: Which is the better option?
Leases are basically of two types: finance leases and true leases. A finance lease is also known as a dollar out, capital, conditional or full payment lease. On the other end, a true lease is also known as a FMV, operating or tax lease. Below, we discuss FMV leases and dollar out leases in detail.
Fair Market Value (FMV) lease: This type of lease is meant for businesses or individuals who prefer fixed, low monthly payments and prefers regular upgrades to sophisticated technology. On culmination of the term of an FMV lease, the lessee has two options: the lessee can either return the equipment or buy it for its Fair Market Value. According to the tax status of the lessee, an upper limit (cap) may sometimes be fixed for the FMV.
Dollar Out lease: This type of lease is best suited for those who desire owning the equipment for the long term. The reason why this type of lease is called a dollar out lease is simple - the lessee is given the option of owning the leased item by making a payment of $1 at the end of the lease terms. The expected monthly payments for a dollar-out lease are slightly higher than those for a Fair Market Value (FMV) lease.
The advantages of FMV leases are many, and include: low monthly payments, option for regular upgrades, preservation of cash flow, tax advantages, no inflation or obsolescence, lower credit demands than those required for a dollar out lease and maximum lease-end flexibility.
Though businesses in most industries prefer FMV leases because of their tax and cash flow advantages, such leases are not a popular option in the postal industry (only 5% of the leases are FMVs). At the end of a dollar out lease, the lessee gains ownership rights over the equipment. A dollar out lease is a great option for small businesses wanting to own the equipment, but cannot because of financial constraints. Also, a lot of lease providers prefer dollar out leases due to the uncertainty of residual value.
For further information regarding FMV and dollar out leases, contact Graphic Savings Group at 203.336.4034 or e-mail us at mail@graphicsavings.com.
The advantages of FMV leases are many, and include: low monthly payments, option for regular upgrades, preservation of cash flow, tax advantages, no inflation or obsolescence, lower credit demands than those required for a dollar out lease and maximum lease-end flexibility.
Though businesses in most industries prefer FMV leases because of their tax and cash flow advantages, such leases are not a popular option in the postal industry (only 5% of the leases are FMVs). At the end of a dollar out lease, the lessee gains ownership rights over the equipment. A dollar out lease is a great option for small businesses wanting to own the equipment, but cannot because of financial constraints. Also, a lot of lease providers prefer dollar out leases due to the uncertainty of residual value.
For further information regarding FMV and dollar out leases, contact Graphic Savings Group at 203.336.4034 or e-mail us at mail@graphicsavings.com.
Labels: dollar out lease, fair market value lease, FMV lease
posted by Graphic Savings Group at 6:50 PM
