Business Telephone Leasing 101
There are typically two types of leases: FBO (fixed buyout) and FMV (fair market value):
FBO leases are usually dollar buyout or 10% and are considered a purchase instead of a rental. The purchase may qualify for a section 179 deduction and be directly expensed, if not you usually have to expense it on a depreciation schedule. This type of lease can FMV leases are usually considered a rental lease and may provide tax advantages as all the payments and taxes can be directly expensed. This type of lease cannot have a known buyout amount. The buyout is calculated as the “fair market value” of the equipment at the end of the lease term. It is usually 15-20% of the original purchase price. Keep in mind that the leasing company probably doesn’t want you to return your old equipment so the buyout amount may be negotiable.
At the end of the lease you can return the equipment, extend the lease, upgrade the equipment and rewrite the lease, or buy out the lease. Returning the equipment is usually not your best choice either, it is usually worth more than the buyout and an upgrade can improve your system while still preserving much of the original investment.
Our leasing companies are very flexible and will also lease other things like furniture, computers, etc. with or without a communications system purchase. They can also provide custom leases with varying terms and payments so please let us know of your special requirements.
We are not accountants or tax professionals and provide this as a general terms explanation. Only your accountant can tell you what kind of lease is best for you, please consult with them.