$1-buyout vs. fair-market-value lease, explained

When you lease equipment, one of the biggest decisions isn’t the monthly payment — it’s what happens at the end of the term. Two common structures, the $1-buyout lease and the fair-market-value (FMV) lease, answer that question very differently. Knowing which one fits your plans can save you money and headaches down the road.

The $1-buyout lease

A $1-buyout lease (sometimes called a capital lease or $1 purchase option) is built around owning the equipment at the end. You make payments through the term, then buy the asset outright for a token amount — a single dollar. In practice, it behaves a lot like financing a purchase.

This structure suits equipment you intend to keep and run for years:

• You end up owning the asset, free and clear
• Payments are typically higher than an FMV lease for the same equipment
• It makes sense for long-life equipment you won’t want to replace soon

If your plan is “use it until it’s worn out,” a $1-buyout often lines up with that goal.

The fair-market-value lease

An FMV lease is built around use rather than ownership. You pay to use the equipment over the term, and at the end you choose what to do: return it, renew the lease, or buy it for its fair market value at that time.

This structure suits equipment you may want to swap or upgrade:

• Payments are usually lower than a $1-buyout for the same asset
• You stay flexible — return, renew, or purchase at term’s end
• It fits fast-changing equipment you’d rather not be stuck owning

The trade-off is that you don’t automatically own anything, and the end-of-term purchase price isn’t a token dollar — it reflects what the equipment is worth then.

How to choose

Start with one question: do you want to own this equipment long term, or use it and move on? Ownership-minded buyers lean toward the $1-buyout; flexibility-minded buyers lean toward FMV. Cash flow matters too — FMV’s lower payments can free up working capital, while the $1-buyout builds toward an owned asset.

There’s also a tax dimension, since these structures can be treated differently on your books. That part is genuinely illustrative only and depends on your situation — confirm with your accountant before deciding, and don’t make the call on tax assumptions alone.

Run both before you sign

Compare the two side by side for your specific equipment. Our calculators help you see how the monthly payments and end-of-term picture differ, and you can read more in our FAQ. These are estimates for planning, not offers of credit.

Still unsure which fits? Talk to us and we’ll walk through both structures for your equipment and your goals — whether you’re looking at Canadian or U.S. leasing.

The right choice comes down to whether you value ownership or flexibility more for this particular asset. Get clear on that, and the rest follows. When you’re ready to lock in the structure that fits, get approved and we’ll set it up.