TL;DR: The Bottom Line
A Fair Market Value (FMV) lease offers the lowest possible monthly payment for your office copier. At the end of the term, you have three flexible options: return the equipment, buy it for its current market value, or upgrade to new technology. This lease is ideal for businesses that prioritize low monthly costs and want to stay current with the latest technology.
Understanding Your Copier Lease Options
When you decide to lease your next business copier, you’ll encounter a few key terms, and “FMV” is one of the most important. But what does it actually mean for your budget and your business?
As you weigh your options in our The Ultimate Guide to Leasing vs. Buying a Business Copier, you’ll find that the FMV lease is the most common and often the most financially advantageous choice. Let’s break down exactly what it is, how it works, and who it’s best for.
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What Exactly is a Fair Market Value (FMV) Lease?
Think of an FMV lease as a long-term rental. You pay a fixed monthly fee to use the equipment for a specific period (typically 36 to 60 months). Because you are only paying for the portion of the machine’s value that you use during the lease term, your monthly payments are significantly lower than other financing options.
The “Fair Market Value” part comes into play at the end of your lease. It’s the price you would have to pay to buy the equipment at that future date—what it’s worth on the open market after 3 or 5 years of use.
The #1 Benefit: The Lowest Monthly Payment
The primary advantage of an FMV lease is its impact on your cash flow. Because the leasing company anticipates that the equipment will still have value at the end of the term (this is called “residual value”), they don’t need to charge you for the full cost of the machine within your lease payments. This directly translates to a lower, more manageable monthly expense for your business.
Your Three Flexible Options at the End of an FMV Lease
When your FMV lease term is up, you are in complete control. You have three simple choices:
- Return the Equipment: If your needs have changed or you simply want a clean slate, you can return the machine and walk away with no further obligation. This is a perfect time to evaluate your needs and see if it’s time to upgrade. Â 5 Signs It’s Time to Upgrade Your Office Copier
- Buy the Equipment: If the copier is still working perfectly for your needs, you can purchase it for its Fair Market Value. While this means you’ll own it, remember to budget for the ongoing costs of supplies and maintenance. The Hidden Costs of Buying a Business Copier
- Upgrade to a New Lease: This is the most popular choice. You can return your old machine and seamlessly roll into a new lease with brand-new, more efficient technology, often for a similar monthly payment.
Key Takeaways: Is an FMV Lease Right for You?
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Frequently Asked Questions (FAQ)
Q: How is the “Fair Market Value” determined at the end of the lease?
A: It’s determined by the leasing company based on the equipment’s age, condition, meter reads, and the current market demand for that specific model.
Q: What is the alternative to an FMV lease?
A: The main alternative is a “$1 Buyout Lease.” This lease has higher monthly payments, but you are guaranteed the option to purchase the equipment for just $1 at the end of the term. It’s more like a traditional financing agreement.
Q: Can I end my FMV lease early?
A: While possible, ending a lease early often involves paying the remaining payments, so it’s usually best to plan on completing the full term. However, flexible upgrade options are often available if your business needs change.
Contact Bishop Business to talk to a Specialist.
Still have questions about leasing? Our team has been helping Nebraska and Kansas businesses make the right choice for decades.
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