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End-of-term option EOT
Also called buyout option, purchase option, lease-end option.
What happens when an equipment lease reaches the end of its base term: buy, return, or keep paying, on terms fixed at signing rather than negotiated at the end.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
The common structures
- $1 buyout. Ownership transfers for a nominal sum. In substance this is a finance lease, priced as such, and accounted for as ownership from day one.
- 10% or fixed-price PUT. Purchase upon termination. The word is put, not option: the lessee is obliged to buy at that price at the end.
- Fair market value. The lessee may buy at a value determined at the end of the term, return the equipment, or renew. Payments during the term are lower because the lessor is banking on residual value.
- Return. Subject to return conditions, freight to a location the lessor names, and an inspection against a maintenance standard written into the schedule.
Which one you have determines the payment, the tax treatment and the accounting, and it is set at signing.
Where this one catches people
Fair market value leases almost always require written notice of your intention inside a window before the term ends, commonly a few months out, and a missed notice renews the lease automatically for another period. The renewal clause, not the buyout price, is where these agreements cost people money. The second trap is the word PUT: a 10% PUT is a purchase obligation, and a lessee who planned to hand the equipment back learns that at the end.
Where you will meet this term
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End-of-term option — common questions
What does end-of-term option mean?
What happens when an equipment lease reaches the end of its base term: buy, return, or keep paying, on terms fixed at signing rather than negotiated at the end.
Where does end-of-term option catch people out?
Fair market value leases almost always require written notice of your intention inside a window before the term ends, commonly a few months out, and a missed notice renews the lease automatically for another period. The renewal clause, not the buyout price, is where these agreements cost people money. The second trap is the word PUT: a 10% PUT is a purchase obligation, and a lessee who planned to hand the equipment back learns that at the end.
Is end-of-term option the same as an interest rate?
End-of-term option is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does end-of-term option apply to?
Equipment Financing.
Is there a worked example of end-of-term option?
Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.
What else should I read alongside end-of-term option?
Auto-renewal, Early termination fee, Equipment finance agreement, Equipment lease, Fair Market Value.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.