Open-end lease

A lease transaction in which the lessee guarantees the residual value of the equipment and also shares in any appreciation of the equipment. In an open-end lease, the fair market value of the equipment at the end of the lease term is estimated at the inception of the lease term; at the conclusion of the lease, the actual value is then determined by either appraisal or sale. If the equipment is worth less than originally estimated, the lessee is liable for the deficiency; if the equipment is worth more, the excess belongs to the lessee. The lessee may or may not have an option to purchase.