Are end of term options fairly standard?
While the concept of including options to purchase or extend the lease at fair market value is quite standard, there is always the issue as to what exactly constitutes “fair market value” and who determines this. Although most lessors will seldom offer it, it is also becoming somewhat more popular to cap the fair market value at a maximum amount, although doing so can affect the lease rate. A lessor will usually not object to a reasonable cap, for while it is important to compensate the lessor for having taken the initial residual risk, it is also important for the lessee not to have to buy out the lease at an unconscionable level. As an alternative to an FMV cap, many lessees are beginning to demand early buy out options, which give them the ability to cancel the lease by virtue of buying ownership of the equipment sometime prior to the end of the initial lease term. While there may be a slight premium for this flexibility, it does allow for more asset control on the part of the lesse
