Dollar buy out leasing is an option that follows suit with a capital lease agreement. At the end of the capital lease, the lease gives the company the option to purchase the asset for $1. The dollar buyout has its advantages and disadvantages including a higher monthly lease price. Before deciding to go with a dollar buyout lease option, research lease types and their buyout options.

Businesses can purchase assets at the end of the lease in a number of ways including a percent of the purchase with option to buy, fair market value lease buying option and the dollar buyout lease. Each has their own set of standards and advantages depending on your circumstances. A dollar buyout may work well for some equipment such as computers or high-cost industrial machinery, or it may only be an added cost in other situations. Research the dollar buy out lease by:

1. Learning the definition and key terms when dealing with leases in general.

2. Getting information about dollar buy out leases used with different types of assets.

3. Comparing your lease buyout options.

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Get a clear definition of the dollar buy out lease as it compares to other lease terms

Before you decide to go with a dollar buyout, research lease buy out loans terms, capital and operating lease information and how choosing a buyout option will affect your terms and conditions of the lease. Knowing the asset's fair market value and depreciation rate is essential before entering into any lease agreement.

I recommend: Get a dollar buyout definition from the American Bank Leasing key terms section, or learn the benefits and downfalls of the dollar buyout at eLease.com "Leasing 101."

Get specific industry and asset dollar buy out lease for beginners information

There are many types of dollar buyout options for different products. Learn specific terms by doing some industry-specific lease research. A dollar buyout option on a computer network won't be the same as a dollar option on a backhoe. Make sure you understand the basic terminology, and then research the specific trends and information as it pertains to the asset you are leasing.

I recommend: Get helpful information technology buyout information from the Robert Frances Group article "PC Leasing vs. Buying Revisited." The Free State Copier website explains the dollar buyout option as it relates to office coping equipment, and American Specialty Equipment Capital has a thorough explanation section that covers leasing for most office and industrial equipment. The Industrial Financial Network also explains the dollar buyout and lease options for machinery.

Compare the dollar buyout lease with other buyout options

There are several lease buyout loans and options from which to choose when leasing assets. Choosing between a fair market value buyout, percentage option or dollar buy out can be a difficult choice without a basic knowledge of each. Get a good understanding of how each works so you can choose the most affordable, workable option for your business.

I recommend: Read the leasing and buying information at Macktez Corporation, or use the comparison table provided by Aspen Corporate Funding that goes over characteristics, benefits, tax implications and more.

Dollar buy out leases give you the option of purchasing the equipment you lease at the end of the agreement. Over the course of the contract, you’ll make a fixed monthly payment on the dollar buy out lease and then have the ability of paying a nominal fee for the equipment in order to own it.

With dollar buy out leasing, you’ll pay more than a true lease. With a true lease, you pay the fair market value of the equipment and don’t receive a buy out option at the end of the contract. Although you pay more on lease buy out loans, you’ll have the ability to record the equipment as assets.

1. Locate the equipment you wish to lease with a dollar buy out option. Find a supplier with the equipment you want to lease and get an estimate on the value of the pieces.

2. Apply for a dollar buy out lease. After selecting your equipment, you can get information about dollar buy out leases and start the application process through a financial institution.

3. Make payments on the lease buy out loan. After you’re finished with the contract, pay the dollar fee and ownership transfers to you.

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Find out about the buy out of leased equipment process

Before you start the application process on a dollar buy out lease, you'll need to find a supplier that permits this type of financing. Go through an equipment leasing company prior to applying for any lease buy out loans.

I recommend: Browse the different type of equipment available for leasing through Tiger Leasing. You’ll also want to go through the different equipment leasing programs on Easy Leasing.

Compare costs of a lease buy out loan versus a true lease loan

Once you decide on the equipment that you wish to buy, you'll want to get cost estimates on dollar buy out leasing services against true leasing loans. The financial institution can let you know the best option for your budget and the type of equipment you're leasing.

I recommend: Use the equipment leasing quotes from AllOptions to decide whether you want a true lease or a dollar buy out lease. Get similar information from the financial experts at Crystal Riley.

Send in an application online for lease buy out loans

After settling on the dollar buy out option, you'll want to get the application process on its way. Processing of your information may take several weeks and if you need the equipment quickly, you'll want to move the process along.

I recommend: With Ervin Leasing, you can download an application form online and send it in for quick processing on your lease buy out loan. Through Coach Capital, you can either download a PDF application form or apply directly over the Internet for your dollar buy out lease.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  With dollar buy out leasing, for tax purposes, you're considered the owner of the equipment. Therefore, you maintain control over its value and may have the ability to list it as a deduction when you file your taxes.

Want to buy your equipment for $1? That may seem too good to be true, but it is a real option when it comes to the end of your lease term. A dollar buy out lease is just one of many different leasing options. You'll want to learn key terms associated with the dollar buy out lease before you sign on the dotted line. While leasing and then buying for $1 may seem like a good deal, do your homework to make sure it's the right option for your unique situation.

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Dollar buy out lease

A dollar buy out lease does just that: it gives the lessee the option of buying the equipment or property being leased for $1 at the end of the lease term.

I recommend: Compare the advantages and disadvantages of the dollar buy out lease option with other options, including the percentage with option to buy and fair market value lease options, at elease.com.

Fair market lease

A fair market lease, also known as an operating lease, allows the lessee to purchase the equipment at its fair market value price at the end of the lease term.

I recommend: Check out an example of the fair market lease financing available from Hewlett-Packard.

Percent of purchase option to buy

A percent of purchase option to buy clause in a lease allows the lessee to purchase the equipment for a percentage of the original purchase price. A common percentage used is 10%.

I recommend: Green Stone Farm Credit Services compares a traditional loan to leasing with a purchase option.

True lease

A true lease refers to a lease which allows the lessee to claim lease payments on taxes. A true lease term is generally short - sometimes shorter than the useful life of the leased property or equipment. A true lease may also include a provision to buy the equipment at fair market value.

I recommend: Capital Funds Leasing explains the details of a true lease further and has specialists available to answer questions.

Depreciation

After you've used the leased equipment for a time, the value of it has depreciated or been reduced. Depreciation can be applied to any non-cash expense and is a result of general wear and age of the asset.

I recommend: This Bankrate article explains depreciation and gives an example of vehicles depreciating in value.

Residual value

When the lease term is up, what is the equipment worth? That value is known as its residual value.

I recommend: Riggs explains what factors go into calculating residual value including the equipment's specific model, age, how it was used, maintenance and the market for used equipment, among others.