Fixed Price Purchase Option

The right, but not the obligation, to buy a leased item at a predetermined price. With a fixed price purchase option, the purchase price is established when the lease terms are agreed upon. The lease agreement should also describe when the option can be exercised (usually at the end of the scheduled lease term). Types of property that may come with fixed price purchase options include automobiles, real estate and heavy equipment.

The advantage of the fixed price purchase option for the lessee is that the lessee knows with certainty what the cost to purchase the property will be. By contrast, with a fair market value lease, the consumer also has the option to purchase the leased item at the end of the lease term, but the price will be the item's fair market value at the lease's expiration. The consumer will not know in advance how much the purchase price will be.


Investment dictionary. . 2012.

Look at other dictionaries:

  • Fair Market Value Purchase Option — The right but not the obligation to buy a leased asset at the end of the lease term for a price that represents the item s then current worth. The Fair Market Value Purchase Option does not provide the purchase price in advance, but as long as… …   Investment dictionary

  • option — op·tion 1 / äp shən/ n 1: the power or right to choose; also: a choice made or available 2: a privilege of demanding fulfillment of a contract on any day within a specified time 3: a contract conveying in exchange for the payment of a premium a… …   Law dictionary

  • option to buy — UK US noun [C] (also option to purchase) ► FINANCE, STOCK MARKET an agreement that gives an investor the right to buy a particular number of shares, or other financial assets, at a fixed price and before a fixed date: »The option to buy expired… …   Financial and business terms

  • option — Right of election to exercise a privilege. Contract made for consideration to keep an offer open for prescribed period. A right, which acts as a continuing offer, given for consideration, to purchase or lease property at an agreed upon price and… …   Black's law dictionary

  • Option (finance) — Stock option redirects here. For the employee incentive, see Employee stock option. Financial markets Public market Exchange Securities Bond market Fixed income …   Wikipedia

  • price — A fixed value of something. Prices are usually expressed in monetary terms. In a free market, prices are set as a result of the interaction of supply and demand in a market; when demand for a product increases and supply remains constant, the… …   Financial and business terms

  • option — an agreement, often for a consideration, which permits the purchase or sale of something within a stipulated time, in accordance with the terms of the agreement. For example, a right by a tenant to take up a further lease of premises, usually… …   Financial and business terms

  • Option — Gives the buyer the right, but not the obligation, to buy or sell an asset at a set price on or before a given date. Investors, not companies, issue options. Investors who purchase call options bet the stock will be worth more than the price set… …   Financial and business terms

  • Fixed exchange-rate system — Foreign exchange Exchange rates Currency band Exchange rate Exchange rate regime Exchange rate flexibil …   Wikipedia

  • option — The right to buy or sell a fixed quantity of a commodity, currency, security, etc., at a particular date at a particular price (the exercise price). Unlike futures, the purchaser of an option is not obliged to buy or sell at the exercise price… …   Accounting dictionary

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.