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Types of Leases FPO vs FMV | Financing a New Machine

When obtaining a new piece of Construction Machinery there are several methods. Rental, Rental Purchase Option (RPO), Lease, and Finance Contract (Purchase).

There are two types of leases Fair Market Value (FMV) and Fixed Purchase Option (FPO). The FMV lease is the lowest cost to use the machine. This type of lease allows you to pay a monthly or annual payment for a set number of years and turn the machine back in. The machine's residual value or FMV portion is determined at the time you return the machine off lease.

Why is the FMV lease cheaper than an FPO lease? The FMV lease takes advantage of the rising costs of new machines and fluctuates based on market demand. Leasing companies and manufacturers are hedging that the machines when returned in the future will be worth more than they are today.

Is the FMV lease for me? If you are looking to have a machine for 2-4 years and turn it in, then yes. This is the cheapest option to operate that machine for a few years.

If you want to own the machine past the lease term... This is most likely not a lease for you. The FPO allows you to lease and then convert to a finance contract allowing you to extend your terms.

For more information please reach out to us or ZAXIS Financial for your Hitachi Leasing needs!


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