What is a "lease option"?

A "lease option" typically refers to a specific clause within a lease agreement that grants the lessee the right, but not the obligation, to purchase the leased asset at a predetermined price during a specified time frame. This feature can be particularly valuable for lessees who wish to eventually own the asset after utilizing it under the lease terms.

The inclusion of a lease option can provide financial flexibility and planning advantages, allowing the lessee to assess the asset's performance or need before making a commitment to purchase. It is often seen in real estate leases and equipment leasing arrangements, where the lessee might want to evaluate the asset's utility and value before deciding to buy it outright. This provision aligns leasing contracts with the lessee's potential long-term strategy regarding asset ownership.