What is Option to Purchase?
A purchase option is defined as an option to purchase the underlying asset of a lease at the end of the lease term at market value. This is just the option to purchase the asset, the lessee is not obligated to purchase the asset at the end of the lease term.
If you are reasonably certain to purchase the asset at the end of the lease, this makes a lease a finance lease, and the system will depreciate the asset over the useful life.
A bargain purchase option is defined as an option to purchase the asset at a sufficiently lower rate than the expected fair value at the date the option becomes exercisable. For example, a tenant has the option to purchase the asset at a reduced rate of $1.00
LeaseGuru Example
The Option to Purchase can be found on the “Options” tab during lease entry or by amending a lease. Select “More Options” to display additional options including option to purchase. Toggle this button to “Yes” if applicable.
