A fair market value lease gives the lessee two options: purchase the leased equipment for the fair market value at the end of the lease period, or renew the lease at the fair market lease value. Fair market value is calculated by comparing similar equipment or property. Specifications and condition are important factors in the determination of the market value of a leased item. Location impacts property values. Any changes in the neighborhood since the initiation of the lease will affect the value of the property at the time of revaluation. Vehicles and equipment, and items with a limited lifespan, depreciate in value. The fair market value is based upon the condition they are in at the time of valuation.
Perform an appraisal of the leased property or equipment. Complete a check list of important factors affecting the value of the item. The check list will be specific to the type of leased property or equipment in question. A property checklist includes location, size, and condition. An equipment checklist includes year model, condition, and special features of the item.
Compare the prices of property or equipment that are similar to the property or equipment leased by you, based upon the appraisal of the item. Data on sales of similar property can be obtained from your local courthouse for real property and titled equipment.
Use established standards for market valuation when available. Standards are established by the history of the market. Rental property management companies can provide comparison rates for similar property. The Kelley Blue Book provides values of used cars, based upon specifications and condition.
Perform your own appraisals, hire a professional appraiser or perform an Internet search to find an online appraiser of your specific leased item.