Bargain Renewal Option

Filed Under:
Dictionary Says

Definition of 'Bargain Renewal Option'


A clause in a lease agreement that gives the lessee the option to renew or extend the original lease on an asset at rates well below market rates. The inclusion of such a clause would require the lessee to classify the lease as a capital lease rather than an operating lease.
Investopedia Says

Investopedia explains 'Bargain Renewal Option'


For example, assume a lease agreement on a property gives the lessee the option to renew it at a monthly lease rate of $10,000, whereas the prevailing market rate is $15,000.

Since a capital lease confers some of the rights of property ownership upon the lessee, as opposed to an operating lease which is purely a rental arrangement, there are significant differences in the accounting treatment of the leased asset and lease payments for capital leases and operating leases.

comments powered by Disqus
Hot Definitions
  1. Legal Monopoly

    A company that is operating as a monopoly under a government mandate. A legal monopoly offers a specific product or service at a regulated price and can either be independently run and government regulated, or government run and regulated.
  2. Closed-End Fund

    A closed-end fund is a publicly traded investment company that raises a fixed amount of capital through an initial public offering (IPO). The fund is then structured, listed and traded like a stock on a stock exchange.
  3. Payday Loan

    A type of short-term borrowing where an individual borrows a small amount at a very high rate of interest. The borrower typically writes a post-dated personal check in the amount they wish to borrow plus a fee in exchange for cash.
  4. Securitization

    The process through which an issuer creates a financial instrument by combining other financial assets and then marketing different tiers of the repackaged instruments to investors.
  5. Economic Forecasting

    The process of attempting to predict the future condition of the economy. This involves the use of statistical models utilizing variables sometimes called indicators.
  6. Chicago Mercantile Exchange - CME

    The world's second-largest exchange for futures and options on futures and the largest in the U.S. Trading involves mostly futures on interest rates, currency, equities, stock indices and agricultural products.
Trading Center