Which are the three forms of purchase and renewal options commonly used in leasing?

Which are the three forms of purchase and renewal options commonly used in leasing?

• A. Nominal, Escalated, End-of-Term Purchase
• B. FMV, Credit-Based, Free Ownership
• C. Nominal, Fair Market Value, Purchase upon Termination
• D. Fixed, Market, Rent-to-Own

Answer: (C)

This question tests how lease agreements handle buying or renewing at the end of the term. The three common forms are: a nominal purchase option, where you can buy the asset for a very small amount (often a dollar), providing an easy path to ownership if it still makes sense; a fair market value option, where the purchase price is based on the asset’s value at the end of the lease, which reflects depreciation and current market conditions; and a purchase upon termination option, which gives the right to buy the asset when the lease ends under terms set in the agreement. These cover the typical end-of-lease paths—from a tiny purchase price to value-based pricing to a straightforward end-of-lease purchase. Other terms like fixed or rent-to-own aren’t the standard trio used to describe these end-of-lease purchase/renewal choices.

This question tests how lease agreements handle buying or renewing at the end of the term. The three common forms are: a nominal purchase option, where you can buy the asset for a very small amount (often a dollar), providing an easy path to ownership if it still makes sense; a fair market value option, where the purchase price is based on the asset’s value at the end of the lease, which reflects depreciation and current market conditions; and a purchase upon termination option, which gives the right to buy the asset when the lease ends under terms set in the agreement. These cover the typical end-of-lease paths—from a tiny purchase price to value-based pricing to a straightforward end-of-lease purchase. Other terms like fixed or rent-to-own aren’t the standard trio used to describe these end-of-lease purchase/renewal choices.