Lease Options I. Operating Lease Definition: Fair market buy-out... Rental with a purchase option. Lowest payment & fully expensed, offering best tax benefit. The buy-out is determined by average market value at term. Indicated in a rapidly changing technology environment. II. Capital Lease Definition: $1.00 to 10% buy-out... Capital purchase with predefined residual. Highest payment with asset amortization / depreciation & interest deduction tax implications. Preferred by those placing value in equity.