When equipment cannot be returned at end-of-lease, the best practice is to buy the equipment as opposed to either extending the lease (even at a reduced rate) or rolling the unreturned assets onto a replacement or new lease. To effectively negotiate a reduction in the buyout cost, an analysis of the all-in cost of leasing is critical.
LPRS Lease End Services reduce the cost of Fair Market Value (FMV) buyouts.
Lease End Services start with a rigorous analysis of the all in cost of the lease relationship to date. This can provide leverage in FMV buy out negotiations.
Negotiating FMV end-of-lease buyouts requires experience and an analytical underpinning, which provides the lessee with leverage. LPRS experts help companies evaluate and reduce the cost of these transactions by 30% on average.
LPRS Lease Agreement and Low Risk Lease Sourcing Services help client’s structure FMV contractual terms properly going forward.
Fair Market Value appears to be an easily understood plain language concept, which should not cause a major dispute at end-of-lease. However, if left undefined, Fair Market Value can become a substantial leverage point for lessors at end-of-lease. Since leasing companies own the equipment and design the FMV contract language, they can typically determine the FMV based on whatever criteria they choose – including the yield they would like on the transaction.
Simply having a Fair Market Value definition in the Master Lease does not eliminate lessee risk. FMV terms and omissions which can drive additional costs include:
- No FMV option or definition at all
- “in place and in use” language
- includes a lengthy appraisal process
LPRS Lease Agreement Services help clients understand the financial, administrative and operational challenges created by their equipment lease agreements.
LPRS Low Risk Lease Sourcing Services provides clients with low risk and cost contract and vendors including a properly defined FMV buyout option.
