FMV vs. $1 Buyout Lease

Two practices can walk into the same equipment purchase at the same price and end up on very different financial tracks depending on which lease structure they chose at signing. The FMV lease and the $1 buyout lease both spread the cost over a fixed term with predictable monthly payments. They differ in who holds the depreciation risk, what you pay each month, and what happens at the end of the term. Choosing correctly means knowing your plan for the equipment before you sign, not after.

Both structures are widely available for dental equipment financing across chairs, delivery units, imaging systems, scanners, milling units, and most major operatory assets. The minimum transaction is $50,000, with most practices priced roughly $100k–$300k for a full operatory or imaging addition. Understanding the mechanics of each helps you make the choice that fits your production model and your appetite for equipment ownership.

How Each Structure Works

FMV (Fair Market Value) Lease: The lender purchases the equipment and leases it to you. Because the lender assumes some residual value at the end of the term, they recover part of the equipment's cost through that residual rather than through your monthly payments alone. This means your monthly payment is lower compared to a $1 buyout on the same equipment. At lease end, you have three standard options: buy the equipment at its fair market value at that time, return it, or roll into a new lease on upgraded equipment. You do not own the asset during the lease term; the lessor does.

$1 Buyout Lease (Capital Lease): You make monthly payments that amortize the full purchase price of the equipment over the lease term. Because there's no residual value the lender is counting on, your monthly payment is higher than an FMV lease on the same asset. At term end, you pay $1 and own the equipment outright. This structure is functionally equivalent to a loan from a financial perspective, with the key difference being the legal form of the agreement. The IRS treats $1 buyout leases similarly to purchases for depreciation purposes.

Payment Differences and Total Cost Comparison

The monthly payment difference between FMV and $1 buyout structures on the same equipment can be significant. On a $150,000 intraoral scanner and milling system bundle financed over 60 months, for instance, an FMV lease might produce a payment that is 15% to 25% lower than the $1 buyout payment on the same term. That difference in monthly outflow is real money, particularly during the early years of building out digital workflow capacity.

Total cost over the life of the lease tells a more nuanced story. The FMV lessee pays less per month but faces an uncertain residual purchase price at term end if they want to keep the equipment. If the fair market value at term end is significant, the total cost of ownership ends up higher than the $1 buyout route. If the lessee returns or upgrades the equipment at term end, the lower monthly payments were genuinely advantageous and the total cost comparison shifts in FMV's favor.

Tax treatment also differs. Section 179 and bonus depreciation apply to $1 buyout leases because you're effectively committing to purchase the asset. FMV operating leases typically let you deduct the monthly payment as a business expense rather than taking a first-year deduction. Which treatment is better depends on your practice's tax situation in the year of the transaction. Your CPA should weigh in before you sign.

Matching the Structure to Your Equipment Plan

The question that determines which structure fits is straightforward: do you plan to keep this equipment for its full useful life, or do you anticipate upgrading before it wears out? For equipment where you plan to own and use it for 10 to 15 years, the $1 buyout is almost always the right structure. Dental chairs, air compressors, and sterilization equipment have long service lives and change little clinically over time. You'll want to own them outright at term end without a residual valuation conversation.

For technology-intensive equipment where the state of the art shifts meaningfully over five-year cycles, an FMV lease may serve better. Intraoral scanners, CBCT units, and CAD/CAM systems evolve in software capability, accuracy, and workflow integration. A practice that plans to upgrade to the next generation at term end doesn't need to own the current-generation unit; they need the flexibility to return it and get into something newer. An FMV lease preserves that flexibility while keeping monthly payments lower during the period they're using the asset.

For cosmetic practices and orthodontic offices where certain technology is central to patient experience and brand, the upgrade cycle is often a deliberate strategy rather than a financial concession. Being on the latest intraoral scanner for case acceptance is a production consideration, and the FMV structure supports that approach without committing to ownership of an asset you plan to replace.

Get Quotes on Both Structures

For any dental equipment transaction, we can show you side-by-side payment comparisons on FMV and $1 buyout structures. Tell us what you're financing, the approximate cost, and your intended term. We'll show you the real numbers so the decision is based on math and your actual plan for the equipment, not on which option the dealer defaulted to on the paperwork.