The arithmetic
Take a $9,450 machine on a 60-month term. A fair market value lease at a 0.0212 rate factor gives a payment near $200. A $1 buyout lease at 0.0224 gives roughly $212. Over 60 months that is a difference of about $720.
The $1 buyout customer then owns the machine outright. The fair market value customer either returns it, paying $300 to $500 in freight, or buys it at whatever the lessor considers market value — often 10 to 15 percent of the original cost. So the fair market value path can end up costing more in total while producing a lower monthly figure throughout.
When fair market value wins
Choose it when you genuinely intend to upgrade at the end of the term. Copier technology moves slowly, but security firmware support does not, and a five-year-old machine begins to look expensive to maintain as parts availability tightens. If you plan to hand the machine back and take a current one, you should not pay for the option to keep it.
Fair market value also suits organizations that want the lowest possible operating expense line and are indifferent to owning depreciating hardware.
When $1 buyout wins
Choose it when your history says you will keep the machine. Plenty of businesses run a copier for eight or nine years, and paying twelve dollars a month extra for five years to own it outright at the end is straightforwardly cheaper than a fair market value purchase plus the risk of an automatic renewal.
It also suits organizations whose accountants prefer capital lease treatment, where the asset and the obligation both appear on the balance sheet. That is a conversation for your accountant rather than your copier dealer.
The honest test
Look at what you did last time. If the machine you are replacing is six years old or more, take the $1 buyout. If you upgraded on schedule at 60 months, take fair market value and put the notice deadline in your calendar.
Our copier leasing page has a calculator that shows both payments side by side for any equipment price.
Common questions
Is a $1 buyout lease the same as financing a purchase?
Functionally it is close. A $1 buyout lease is usually treated as a capital lease rather than an operating expense, which is why accountants often compare it directly against an equipment loan.
How is fair market value calculated at the end of a lease?
The lessor sets it, typically at 10 to 15 percent of the original equipment cost for an office copier, based on age, meter reading and condition. It is not fixed in the contract, which is the main risk of the fair market value structure.