At the end of a finance lease agreement, there are several options available for the lessee. A finance lease is a type of lease in which the lessee (the person or entity leasing the asset) pays for the use of the asset over a set period of time, with the option to purchase the asset at the end of the lease agreement.
One option available to the lessee at the end of the finance lease agreement is to purchase the asset. This option is commonly referred to as a “balloon payment” and is typically an agreed-upon value in the lease agreement. The lessee will need to pay this amount to take ownership of the asset.
Another option available to the lessee is to return the asset to the lessor (the company or individual who owns the asset). The lessee may also be required to pay any end-of-lease fees or charges associated with returning the asset. It is important to note that if the asset is returned in less than satisfactory condition, the lessee may be responsible for any repairs or damages.
If the lessee does not wish to purchase the asset and does not want to return it to the lessor, a third option available is to extend the lease agreement. This option may be beneficial if the lessee still needs the asset and would like to continue using it.
It is important for the lessee to carefully review the terms of the finance lease agreement before it expires to understand their options and any associated costs. Additionally, it is recommended to begin discussing these options with the lessor well in advance to ensure a smooth transition at the end of the lease agreement.