Topic Terminable Contract: A termination right for the customer in a leasing agreement makes sense to enable longer cont

Topic Terminable Contract: A termination right for the customer in a leasing agreement makes sense to enable longer contract terms. In return, the contract runs indefinitely and must be actively terminated by the customer.

Terminable leasing contracts usually arise from a tax-related necessity: according to the leasing decrees, leasing contracts must end between 40% and 90% of the standard useful life of the asset — or, which is also sufficient, include a termination right for the customer, in which case the contract term may also exceed the 90% threshold. Typically, a non-terminable base rental period is agreed upon, followed by regular termination options, e.g. every 6 months.

So much for the legal framework.
However, the same principle applies here: "There is no free lunch."

Anyone who actually exercises this termination right pays a final settlement amount. This is calculated based on the remaining instalments until the end of the calculated term — usually discounted, and often even with an additional surcharge. This is how the leasing company ensures that the asset is fully amortised.

The termination right therefore only serves to secure the tax and balance sheet recognition of the contract for the longer term (reverse authoritative principle).
It by no means guarantees a favourable or flexible exit.

And the contract runs indefinitely — the customer must actively terminate it (please observe notice periods).

This means for your financing structure:

🔹 Decree compliance and economic flexibility are two completely different things.
🔹 Early termination is usually a costly affair!
🔹 Using the asset beyond the calculated term, whether intentionally or due to a forgotten termination, is usually equally costly!

So before you base investment decisions on the assumption that you are getting flexibility at no extra cost, it is worth taking a close look at the details.

👉 Are you currently planning major investments with terminable structures?
👉 Or are you simply being offered a terminable contract and don't even understand why?
👉 Have you calculated the actual costs of an early exit or extended use?
👉 Have you noted the notice periods?

Don't leave contract structuring to chance.

Let's talk!