What Happens at the End of a Lease or Another Finance Agreement?

Updated 12/21/2022. Originally published 1/16/2020.

Have you heard the phrase: "Nobody likes surprises?" 

This phrase is likely referring to bad surprises or unclear expectations. We understand providing a monthly payment option can cause a bit of anxiety for those new to financing. You are placing some of the customer’s experience out of your hands. Because of that, it’s important to select a finance company who is committed to providing an exceptional experience. 

One of the most common points of confusion is what happens at the end of the lease agreement. Many times, both the solution provider and the customer are so wrapped up in the present, they forget something will happen in three to five years. Even if you do a great job of explaining what happens at the end, there is a good chance the customer will forget – or worse – the person you were working with may no longer be with the company. 

What happens at the end of a lease? 

What happens at the end of a lease all depends on the type of lease. In this article, we explain what happens at the end of an agreement for these three lease types: 

1. Fair Market Value (FMV) 
2. Rental Agreement 
3. $1 Buyout or Equipment Finance Agreement (EFA) 

Related: 3 of the Most Common Equipment Lease Types [2022] 

Here’s what you and your customer should expect on each of these lease types: 

What happens at the end of a fair market value lease? 

A Fair Market Value (FMV) lease is the most common lease type. It provides a low monthly payment and multiple options at the end from which the customer may choose. On a standard GreatAmerica FMV lease we notify your customer on their last regular term invoice that their lease term has come to an end, and it is time to exercise their end of term options. They may choose to upgrade to a new solution, purchase the technology for the fair market value, return the equipment, or continue renting the equipment. 

FMV lease end of term option: upgrade 

Fair market value agreements include a decision point, and give you an opportunity to upgrade your customer’s technology. 

When you recommend a technology upgrade on an FMV agreement with your customer, you’ll request an upgrade quote from GreatAmerica.  If you choose the “upgrade to keep” option GreatAmerica offers a discount. GreatAmerica makes the upgrade process easy allowing you to sell new hardware, software, and installation services that the customer might need. 

FMV lease end of term option: purchase 

If your customer chooses to purchase the technology, they will request a quote from GreatAmerica to purchase the equipment. As soon as your customer makes that request, we notify you, giving you an opportunity to understand what their intent is, and whether you have an opportunity to upgrade their technology. 

If your customer chooses to not upgrade with you, they can choose a “buyout to keep” option. The quoted cost to buyout and keep their equipment includes the fair market value of the equipment, the sum of remaining stream of payments, applicable taxes, and any other open items. That quote is valid for 30 days, and once we receive payment the account is closed, they own the technology, and we have no further interaction. 

FMV lease end of term option: return 

If your customer chooses to return the technology, they’ll request a quote from GreatAmerica for the return. As soon as your customer makes that request, we will notify you, giving you an opportunity to understand what their intent is, and whether you have an opportunity to upgrade their technology. 

 If your customer chooses to not upgrade with you, they can choose a “buyout to return” option. The quoted cost to buyout their lease and return the equipment includes the sum of remaining stream of payments, applicable taxes, billed renewal payments, and any other open items. That quote is valid for 30 days which means your customer has 30 days to ship back all equipment and ancillary attachments to our remarketer, who we selected at the time of the quote. Your customer is responsible for any costs associated with insuring and shipping the equipment.  Once the equipment is verified as received, we will close the account and have no further interaction. 

What happens at the end of a rental agreement? 

In a rental agreement, your customer has fewer options. More often these rental programs are used in scenarios where the technology is frequently upgraded after a fixed amount of time. Think in terms of a laptop that will likely be replaced every three years. The three options they have are: upgrade, return, or continue renting. 

Rental agreement end of term option: upgrade 

The same process applies to technology upgrade rental agreements as with FMV agreements, as described above. Rental agreement end of term option: return 

The same process applies as with an FMV agreement, as described above, with one change: with a rental, we ask you to provide the return quote to the customer. We do this because we want you to maintain your relationship with your customers, and this is another way for you to maintain quality communication. 

Rental agreement end of term option: continue month to month 

The final option for your customer, the default on a Rental Agreement, is to continue renting the technology on a month-to-month basis. If you or your customer do not contact GreatAmerica at the end of the agreed-upon initial term of the agreement, we continue billing them on a month-to-month basis, until we receive further direction or quoting requests to take a different act ion. 

What happens at the end of a $1 buyout agreement or equipment finance agreement? 

The outcome of both options is your customer owning the technology. We typically don’t recommend these options because they can encourage your customers to hang onto old, outdated technology for too long. The upside of these agreements is they are straightforward. At the end of the agreement, they own the technology free and clear of any lien by GreatAmerica and billing is discontinued once their final scheduled payment is received. 

How to keep track of end of term 

Once you build a big book of business on financing terms, you’ll want to stay on top of what agreements are coming to the end of term. You can use the GreatAmerica info-zone.com portal to pull upgrade opportunity reports, which you can subscribe to monthly. The handy report includes the customer name, number of remaining payments, and estimates a buyout/upgrade quote. 

The end of an agreement shouldn’t be scary or unexpected. Instead, use finance agreements to create some predictability in your customers’ technology lifecycle, and help keep those customers for a lifetime. If you are interested in learning more about technology financing, click the button below to hear answers to common questions surrounding technology financing.