First Amendment Lease
The first amendment lease gives the lessee a purchase option at one or more defined points with a requirement that the lessee renew or continue the lease if the purchase option is not exercised. The option price is usually either a fixed price intended to approximate fair market value or is defined as fair market value determined by lessee appraisal and subject to a floor to insure that the lessor’s residual position will be covered if the purchase option is exercised.
If the purchase option is not exercised, then the lease is automatically renewed for a fixed term (typically 12 or 24 months) at a fixed rental intended to approximate fair rental value, which will further reduce the lessor’s end-of-term residual position. The lessee is not permitted to return the equipment on the option exercise date. If the lease is automatically renewed, then at the expiration of that initial renewal term, the lessee typically has the right either to return the equipment without penalty or to renew or purchase at fair market value.
With Alliance Funding Groups first amendment lease, the lessee has the option to purchase the equipment at various points throughout the lease or after the rental term is over. There is no option to return the equipment during the lease period of a first amendment lease. If the purchase option during the lease term is not utilized:
It is required that the Lessee continues or renews the lease
The Lessee will have the option of purchasing the equipment at fair market value (or a specified price) at the end of the lease term
At AFG nearly 100% of our first amendment leases materialize into purchase of equipment or machinery by the lessee on completion of a full term, thus signifying the transparency and customer focus practiced by our team of professionals. AFG’s first amendment lease also helps the lessee avail tax benefits and the lessor to avail depreciation benefits.