- A legal contract that permits the owner, depending on the type of option, to purchase, sell, or lease an asset at a set price for a specific time period.
Related Terms and Acronyms
- Closed-end Lease — Definition,
- The most common type of car lease. The lessee may return the car at the end of the lease term, pay any end-of-lease costs, such as the disposition fee, and the lease agreement is over. In a closed-end lease, the lender assumes the risk of predicting the value of the vehicle (its residual value) at the end of the lease's term. Closed-end lease payments are somewhat higher than open-end lease payments.
- Lease (lse) — Abbreviation,
- A written agreement in which the property owner allows a tenant to use property in exchange for rent, and for a specified period. Or, a written agreement in which a car dealer allows a consumer to use a vehicle in exchange for payments for a specified period.
- Lease Extension — Definition,
- The continuation of an existing lease, at the original monthly payment, usually on a month-by-month basis.
- Lease Option — Definition,
- A written agreement in which an owner allows an individual to use a property in exchange for rent, and also gives that individual the right to buy the property for a specified price within a specified period
- Median Price — Definition,
- In a given area, the amount paid for a house in which half of the houses in that area sell for less and half sell for more.
- Open-end Lease — Definition,
- Sometimes called a finance lease. It usually offers lower payments, but carries a risk for the consumer. Under an open-end lease, the lessee must pay any difference between the residual value of the car as stated in the lease and the fair market value of the car, if lower, at the end of the lease. The lessor pays for the appraisal that sets the value. If the consumer doesn't agree with it, the consumer may pay for a binding, independent appraisal by someone agreed to by both parties.
- Purchase Agreement — Definition,
- A written promise to pay a specific amount for a property at a specified time. The purchase agreement is a written statement of the offer, which both the borrower and the seller will sign if the offer is accepted.
- Purchase Option — Definition,
- An agreement where a portion of monthly rent can be credited toward the purchase of a property.
- The portion of a vehicle lease that determines how much a lessee pays the lessor at the end of the lease to buy the vehicle. The price is usually the residual value.
- Right of First Refusal — Definition,
- An agreement by an owner to give another party an opportunity to buy the property before it is offered to anyone else.