Operationally, upgrading is accomplished with a prepayment of the existing contract. This lump sum is often rolled into a new lease for new equipment. Many lessors require a substantial penalty fee to avoid having equipment returned early, especially if they themselves are paying interest costs and have no effective disposal channel for the equipment. Manufacturer-lessors, on the other hand, do not penalize lessees for upgrades or adding on because they want to build product loyalty, and they have processes in place to remarket returned equipment. This can be a money-saving feature in the long run.
Some lessors charge a substantial fee for buying the lease out.
For you, this amounts to a penalty, even though you are taking the equipment off the lessor's hands. Other lessors, especially manufacturer-lessors, charge only an administrative fee because they want to encourage you to buy their products even after just a few months of leasing. By providing a predetermined buyout schedule up front, some lessors let you see exactly what the purchase cost will be at any point during your lease term. Some lessees feel protected from an unfair buyout prices if it is based on the FMV the current market value in the used equipment marketplace. If at the end of term you want to own the equipment, beware of what the FMV option price may mean.