Glossary
Direct Lease - You identify
the asset (and negotiate the price) and arrange for
the leasing company to buy it from the manufacturer
(if new) or the previous owner (if used) to rent it
to you. (see also sale-and-leaseback)
Economic Life (useful life) - The
period of time during which an asset has economic value
and is usable.
Fair Market Value - Price at which
an asset is sold and bought in the open market.
Lease - A lease is a contract in which
the lessor purchases the asset selected by you and conveys
the use of an asset to you for a specific period of
time at a predetermined rate.
Lease Rate - The periodic rental payment
to the lessor for the use of the asset. The lease rate
is primarily determined by the total cost of the asset,
the duration of the lease and the interest rate level.
Lessee - The lessee is the user of
the asset being leased, i.e. you.
Lessor - The lessor is the party who
has legal or tax title to the equipment, grants the
lessee the right to use the equipment for the lease
term, and is entitled to the rentals, i.e. the leasing
company.
Master Lease - A contractual arrangement
which allows you to lease other assets under the same
basic terms and conditions without negotiating a new
contract.
Purchase Option - A provision by which
you have the right to purchase the asset at the end
of the lease term, either at a predetermined amount
or its fair market value.
Residual Value - The resale value
of the asset at the end of the lease.
Sale-and-leaseback (also called purchase leaseback)
- You sell an asset you already own to the leasing company
for fair market value or book written down value (whichever
is less) and then lease it back (see also direct lease).
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Asset
Financing Guide
