Bargain purchase option definition
/What is a Bargain Purchase Option?
A bargain purchase option is a clause in a lease agreement that allows the lessee to purchase the leased asset for substantially less than its fair market value as of the termination date of the lease. The purchase price is set sufficiently low that there is a reasonable expectation that the lessee will exercise the option and purchase the leased asset.
When this option is present, the lessee is usually required to treat the lease arrangement as a finance lease, where the lessee recognizes the leased asset on its own balance sheet.