Equipment Leasing Glossary of Terms

Glossary of Terms

Captive Leasing Company
A subsidiary leasing arm of a manufacturer or dealer.

Deferred Payment Lease
A payment schedule that allows you to defer your first payment by 60 or 90 days.

Fair Market Value Purchase Option
An end-of-term lease option that allows you to purchase the equipment at its fair market value.

Finance Lease
A type of lease that gives you the option to purchase the equipment for a nominal fee at the end of the lease.

Friendly Buy Out
Occurs when you break your lease so that the lessor can upgrade you to a newer model. Because the lessor assumes full responsibility for the remaining payments, you incur no penalties.

Lessee
The party that leases the equipment.

Lessor
The company that agrees to buy the equipment and rent it back to you.

Master Lease
A lease structure that allows you to add new equipment on an ongoing basis without changing the basic terms or conditions.

Residual Value
The value of the asset at the end of the lease.

Sale-Lease Back
You sell equipment that you already own to a lessor who agrees to lease it back to you.

Skip Lease
A payment schedule that allows you to skip monthly payments without incurring penalties.

Step-Up Lease
Geared for companies with limited cash who are dependent on the acquisition of specific equipment to increase revenue. Payment amounts increase over time under this repayment schedule.

True Lease
Depending on its structure, a type of lease that allows you to fully claim lease payments for tax purposes. The term is generally shorter than the full useful life of the equipment. At the close of the lease, you can decide to purchase the equipment at fair market value.

Vendor Program
A partnership between a funding source and manufacturer or dealer to offer leasing to their customers. In this case, the funding source can be likened to a captive lease company.