Leasing Terms

Advance Payments: One or more lease payments required to be paid to the lessor at the beginning of the lease term. Lease structures commonly require one payment to be made in advance.

Bargain Purchase Option: A lease provision allowing the lessee, at its option, to purchase the leased property at the end of the lease term for a price that is sufficiently lower than the expected fair market value of the property.

Delivery and Acceptance Certificate: A document that is signed be the lessee to acknowledge that the equipment to be leased has been delivered and is acceptable.

Fair Market Value: The value of a piece of equipment if the equipment were to be sold in a transaction determined at arm’s length, between a willing buyer and a willing seller, for equivalent property and under similar terms and conditions.

Full-payout Lease: A lease in which the lessor recovers, through the lease payments, all costs incurred in the lease, without any reliance upon the leased equipment’s future residual value.

Lease: The contractual agreement between a lessor and lessee that sets forth all the terms and conditions of the lease

Lessee: The person or company that obtains the property by lease.

Lessor: Owner of the equipment to whom payments are made.

Purchase Option: An option in the lease agreement that allows the lessee to purchase the leased equipment at the end of the lease for either a fixed amount or at the future fair market value of the leased equipment.

Residual Value: The value, either actual or expected, of leased equipment at the end, or termination, of the lease.

Skipped-Payment Lease: A lease that contains a payment stream requiring the lessee to make payments only during certain periods of the year.