$1 Buyout Lease vs Fair Market Value Lease: Which One Fits Your Business?
November 5, 2026 · 6 min read · Equipment Funding Network
The choice comes down to one question: do you want to keep the equipment after the term? A $1 buyout lease means you pay for the whole machine over the term and buy it for a dollar at the end. A fair market value lease, or FMV lease, means you pay for the part of the machine's value you use up, and at the end you buy it at whatever it is worth then, renew, or hand it back. The FMV payment is lower, but that is not because it is cheaper. It is because you have not paid for the whole thing.
To run your own numbers, use the $1 buyout vs FMV lease calculator.
Before you sign one, work through the lease-purchase checklist.
To compare a fair market value lease with a loan, use the lease vs buy calculator.
Looking at your own deal? See Technology Equipment Financing, Technology Equipment Financing in Texas and Technology Equipment Financing in Virginia.
How a $1 buyout lease works
Your payments cover the full price of the equipment plus the lessor's charges. At the end you pay one dollar and the equipment is yours. In practice it behaves much like a loan: you take on the whole cost, and you keep the equipment and its resale value. It is sometimes called a capital lease or a finance lease. There is no surprise at the end, because the end price is set at signing.
How a fair market value lease works
Your payments cover the difference between the price and what the lessor expects the equipment to be worth at the end, plus its charges. At the end you choose: buy it at its fair market value then, renew the lease, or return it. Nobody knows that end price today, so if you buy it, you are paying a number that was never fixed. If you return it, return conditions apply on hours, miles and wear.
Most FMV leases require written notice a set number of days before the end, often a few months, if you plan to return or buy. Miss the notice and many renew on their own at the same payment. Put the date in your calendar the day you sign.
Who each one fits
- $1 buyout: equipment with a long working life and a real resale market, like trucks, trailers, excavators, loaders and machine tools.
- $1 buyout: you already know you will keep it past the term.
- $1 buyout: you want to own it free and clear, to use as collateral or sell later.
- FMV lease: equipment that goes out of date before it wears out, like computers, servers, imaging systems and anything run by software.
- FMV lease: you replace on a set cycle anyway, every three or four years.
- FMV lease: the equipment is for a contract that ends, and you want to hand it back when the work does.
How to compare the total cost
Comparing the two payments tells you very little. Compare what each one costs you for the result you want. If you plan to keep the equipment, add the FMV buyout to the FMV lease's payments and compare that with the $1 buyout's payments. If you plan to return it, compare the FMV lease's payments with the $1 buyout's payments minus what you could sell the equipment for at the end.
A round example, not a quote: on a $60,000 machine, say a $1 buyout lease costs $72,000 in payments over its term, and an FMV lease costs $54,000 in payments over the same term. The FMV lease looks $18,000 cheaper. But if you keep the machine and its fair market value at the end is $15,000, the FMV route costs $69,000, close to the buyout, and you did not know the final price until the end. If you return it instead, compare the FMV lease's $54,000 with the buyout's $72,000 less the $15,000 you could sell the machine for, which is $57,000. Either way the real gap is a few thousand dollars, not the $18,000 the payments suggest.
Other end-of-term options you may see
- Fixed purchase option, often stated as a percentage of the original price. The payment sits between a $1 buyout and an FMV lease, and the end price is known at signing.
- A PUT, short for purchase upon termination. You must buy the equipment at the stated price at the end; it is not your choice.
- TRAC lease, for trucks and trailers. The truck's value at the end is settled against a residual agreed at the start, so you carry the risk if it sells low.
Taxes and your books
The two are often treated differently for taxes. A $1 buyout lease is generally treated as a purchase, so you depreciate the equipment, while a true FMV lease is generally treated as rent. Sales tax can differ too. Which is better for your business is a question for your CPA, with the actual lease in hand. This guide is not tax advice.
Where EFN fits
EFN is not a lender, and it does not approve or fund deals. You describe the equipment and the business in one short application, and the first step is a soft credit pull that does not affect your score. Tell us whether you want to own the equipment at the end, and the file goes to a lender that writes the structure you asked for. A person reviews every file before it goes to a lender, and it goes to one lender at a time, not out to a list. If nothing fits, we tell you so. EFN's service is free to you.
Common follow-up questions
What is a $1 buyout lease?
A lease where your payments cover the full price of the equipment and you buy it for one dollar at the end. It works much like a loan.
What is a fair market value lease?
A lease with a lower payment, because you pay only for the value you use up. At the end you buy the equipment at its value then, renew, or return it.
Which is cheaper, a $1 buyout or an FMV lease?
The FMV payment is lower, but if you keep the equipment you pay its value at the end too. Compare the total for the result you want, not the payments.
Is a $1 buyout lease the same as a loan?
Close. You pay for the whole machine and own it at the end. The paperwork, title and tax treatment can differ, so ask your CPA how yours would be treated.
What happens if I miss the notice date on an FMV lease?
Many FMV leases renew on their own at the same payment if written notice is not given in time. Check the notice window and mark it the day you sign.