Equipment Lease End-of-Term Options: $1, FMV & PUT
The end-of-term option decides whether you own the equipment, pay an uncertain residual, or are forced to buy — know which one you signed.
Last reviewed: May 26, 2026 by the BizLeaseCheck Editorial Team
General information, not legal advice.
Overview
At the end of an equipment lease, what happens to the equipment depends entirely on the end-of-term option. The main types — $1 buyout, fair-market-value (FMV), PUT, and TRAC — carry very different costs and risks.
Choosing or recognizing the right option is central to understanding the deal’s true cost.
Topics to check
A $1 (or nominal) buyout means you own the equipment at the end for a token amount — economically a financed purchase, with a higher payment but certainty and ownership. A fair-market-value (FMV) option lets you buy at the then-current market value (or return or renew), with a lower payment but an uncertain end cost and residual risk.
FMV "market value" can be defined by the lessor in ways that make the buyout expensive, so read the FMV definition carefully.
A PUT option requires you to purchase the equipment at a set price at the end — you have no choice. A TRAC (terminal rental adjustment clause) lease, common for vehicles, sets a residual and trues it up at the end based on the actual sale price, shifting residual risk to the lessee.
Both can create a large, sometimes unexpected, payment at lease end, so model the end-of-term cost up front.
Each option usually requires timely written notice within a defined window; missing it can trigger automatic renewal or default the option. If you intend to return the equipment, confirm the return logistics, condition standards, and any restocking or refurbishment fees.
Calendar the notice deadline the day you sign.
Key takeaways
- $1 buyout = ownership and a financed purchase (higher payment, certainty).
- FMV = lower payment but uncertain end cost and residual risk; read the FMV definition.
- PUT forces a purchase; TRAC trues up a residual and shifts that risk to you.
- Options require timely written notice — missing it can trigger renewal.
- Model the end-of-term cost and return obligations before signing.
Official resources
Legal-review notes
Guide confidence marker: Medium confidence.
- End-of-term and FMV definitions are negotiated and vary by document.
- Tax treatment of buyout options depends on the structure; consult a tax advisor.
Frequently asked questions
What is the difference between a $1 buyout and an FMV lease?
A $1 buyout lets you own the equipment for a token amount at the end (a financed purchase with a higher payment). An FMV lease lets you buy at fair market value, return, or renew, with a lower payment but an uncertain end cost and residual risk.
What is a PUT or TRAC option?
A PUT requires you to buy the equipment at a set price at the end of the term. A TRAC (common on vehicles) sets a residual and adjusts it based on the actual resale price, shifting residual risk to the lessee. Both can create a large end-of-term payment.
What happens if I miss the end-of-term notice deadline?
You can lose the option and trigger automatic renewal for another term. Each end-of-term option usually has a strict written-notice window, so calendar the deadline when you sign.