Fair Market Value (FMV) Lease

Fair market value at end of term is what a willing buyer would pay a willing seller in an arm's-length transaction for the equipment in its then-current condition. It is typically determined by secondary market data and may be assessed by the lessor, an independent appraiser, or by reference to published resale indices for that equipment class.

Early buyouts are possible in most FMV leases, typically at an early termination value that reflects the remaining payments plus the residual. The calculation varies by lease agreement. If early buyout is a likely scenario, discuss it during structuring so the terms address it clearly.

In practice, the end-of-term purchase price is set by the secondary market at that point, not by negotiation in the traditional sense. If you believe the market value is lower than the lessor's estimate, you can get an independent appraisal to support your position.

An operating lease structured as an FMV lease typically allows the full lease payment to be deducted as an operating expense. A loan, by contrast, allows only the interest component to be deducted, with the principal paid from after-tax dollars. Whether the FMV lease is better overall depends on your tax situation. Talk to your accountant.

Standard lease return conditions are defined in the agreement and typically allow for normal wear and tear from clinical use. Damage beyond that definition may result in a charge based on repair cost or diminution of resale value. Most practices returning equipment in clean clinical condition have no issue.