Glossary of Terms
Term Definition
Accelerated Depreciation Any depreciation method that allows for greater deductions or charges in the earlier years of an asset’s depreciable life. Deductions become progressively smaller in each successive period.
Accumulated Depreciation A financial reporting term for a contra-asset account that shows the total depreciation charges for an asset since acquisition.
Actuarial Interest A constant interest charge (or return) based upon a declining principal balance.
Adjusted (or Remaining) Basis The undepreciated amount of an asset’s original cost that is used, for tax purposes, to calculate the gain or loss on disposition of the asset.
Advance Payments One or more lease payments required to be paid to the lessor at the beginning of the lease term.
Alternative Minimum Tax (AMT) A penalty tax in which a taxpayer must pay the higher of its regular tax or AMT liability. AMT is partially based on a company taking too many depreciation deductions.
Amortization The process of separating payments into their principal and interest components. An amortized lease is one in which the principal amount of the lease is repaid in installments over the life of the lease. Each payment is comprised partially of interest and partially of principal.
Annuity A stream of even (equal) cash flows occurring at regular intervals, such as even monthly lease payments.
Approved For Credit This lender has reviewed your credit history and has indicated their willingness to fund the lease. See the details of the proposal for any special terms.
APR The annual interest cost of a lease when all payments, down payments, and documentation fees are included. Computed in accordance with the US Government's Regulation Z for compound interest.
Arrears A payment stream in which the lease payment is due at the end of each period during the lease.
Asset Class Life The IRS-designated economic life of an asset, used as the depreciable life for computing alternative tax depreciation.
Assign To transfer or exchange the future rights in a lease, usually in return for an up-front payment.
Average Payment The sum-total of all payments made over the term of your lease divided by the total number of payments. Down payments (which reduce the amount financed) are not included.

Term Definition
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Bankruptcy An action taken by a debtor to legally protect its remaining assets by declaring that it cannot pay its bills. Typically, the debtor’s liabilities exceed its assets.
Bargain Purchase Option A provision allowing the lessee, at its option, to purchase the leased property at the end of the lease term for a bargain price. A bargain option is one that is so much lower than the expected fair market value of the property that the lessee is reasonably sure to exercise it.
Bargain Renewal Option A provision allowing the lessee, at its option, to extend the lease for rental payments that are so much less than fair value that the lessee is reasonably sure to exercise it.
Base Term The minimum time period during which the lessee will use, and pay rentals on, the equipment.
Basis The original cost of an asset plus other capitalized acquisition costs such as installation charges and sales tax. Depreciation charges are computed on the equipment’s basis.
Basis Point One one-hundredth of a percent (.01%).
Broker An intermediary between the lessee and lessor. The broker arranges a leasing transaction. The broker is usually paid some fee by the leasing company for its services; see "Lease Broker."
Bundled Lease A lease that includes additional services such as maintenance, insurance, and property taxes that are paid for by the lessor. The cost of these services is built into the lease payments.
Buyout The amount a lessee must pay to the lessor to terminate a lease early. The buyout is usually calculated by multiplying the monthly lease payment by the number of payments remaining.

Term Definition
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Call Option Any option in a lease, such as a purchase or a renewal option, that is exercised at the discretion of the lessee.
Capital Budgeting The process of analyzing the acquisition of new equipment, and deciding whether or not the revenue and/or cost savings generated by the asset are sufficient to justify its cost.
Capital Lease A specific classification of a lease for accounting purposes. The classification of the lease will determine the accounting treatment used by the lessee. A lease is accounted for by the lessee as a capital lease if it meets one of the following criteria: (a) at the end of the lease, the lessee owns the property being leased; (b) at the end of the lease, the lessee can purchase the property for a bargain purchase option; (c) the lease term exceeds 75% of the estimated economic life of the leased property; (d) the present value of all lease payments is equal to 90% or more of the cost of the leased property.
Capitalize To record an expenditure that benefits future periods as an asset, rather than as an expense.
Capitalized Cost The amount of an asset shown on the balance sheet, from a financial reporting perspective. The total capitalized cost may include the asset’s cost plus other amounts such as sales tax.
Capped Fair Market Value A provision in the lease allowing the lessee to purchase the leased property for its fair market value, but not exceeding a certain amount. The advantage of the cap is that the lessee will know the maximum payment required to purchase the leased property and will be better able to calculate the total cost of the lease.
Captive Lessor A leasing company set up by a manufacturer or dealer of equipment to finance or lease its products to end-users or lessees.
Casualty Value A schedule included in a lease that states the insured value of the equipment at various times during the term of the lease. This schedule establishes the liability of the lessee to the lessor in the event the leased equipment is lost or rendered unusable during the lease term. (see also Stipulated Loss Value Table)
Certificate of Delivery and Acceptance A document signed by the lessee to acknowledge that the equipment to be leased has been delivered and is acceptable. It also is called the D & A.
Closed-end Lease A lease that does not contain a purchase or renewal option, thereby requiring the lessee to return the equipment to the lessor at the end of the lease.
Collateral Equipment or other tangible assets such as cash or securities pledged by the lessee, to the lessor, to minimize the risk of default.
Commitment Fee A fee required by the lessor, at the time a proposal or commitment is accepted by the lessee, to lock in a specific lease rate or other lease terms.
Commitment Letter A document prepared by the lessor that sets forth its commitment, including the lease rate and term, to provide lease financing to the lessee.
Compensating Balance The amount of funds a bank requires a borrower to keep on deposit during the term of a lease.
Conditional Sales Contract An agreement for the purchase of an asset in which the lessee is treated as the owner of the asset for federal income tax purposes The lessee does not become the legal owner of the asset, however, until all terms and conditions of the agreement have been satisfied.
Contingent Rentals Rentals in which the payment of rents is dependent upon some factor other than passage of time.
Cost of Capital The weighted-average cost of funds that a firm uses, both debt and equity, in order to fund its assets.
Cost of Debt The borrowing costs incurred by a firm to fund the acquisition of its assets.
Cost of Equity The return on investment required by the equity holders of a firm.
Coterminous Two or more leases that end at the same time.
Credit Scoring An objective method of quantifying credit worthiness by assigning numerical values based on meeting established credit criteria.
Cross Corporate Guarantee A guarantee by one corporation to pay the lease obligations of another corporation.

Term Definition
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Debt Participant A long-term lender in a leveraged lease transaction.
Declining Balance Depreciation A type of accelerated depreciation in which a constant percentage of an asset’s declining, or remaining, basis is expensed each year.
Default If a lessee does not comply with the terms of the lease, a default occurs. Generally, after a default, the lessor can exercise all of its rights under the lease to repossess the property and seek money damages.
Depreciation A means for a company to recover the cost of its purchased assets, over time, through periodic deductions or offsets to income.
Direct Financing Lease A lessor capital lease (per FASB 13) that does not give rise to manufacturer’s or dealer’s profit (or loss) to the lessor.
Discount Rate The interest rate that is used to bring a series of future cash flows to their present value, thereby stating them in current (today’s) dollars.
Discounted Lease A lease in which the lease payments are assigned to a funding source by the lessor, in exchange for up-front cash.
Disposition The eventual sale or salvage of leased equipment upon its return to the lessor.
Dollar Buyout An option at the end of the lease to buy the leased property for $1.

Term Definition
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Early Termination An event in which the lessee returns leased equipment to the lessor prior to the end of the lease term, subject to the terms of the lease agreement.
Economic Life of Leased Property The period during which the property is expected to function, for one or more users and with normal repairs and maintenance, in the role for which it was originally intended.
End-of-Term Options Options in the lease agreement that give the lessee flexibility in its treatment of the leased equipment at the end of the lease term. These options usually include equipment purchase, return, or lease renewal.
Equipment Schedule A document, incorporated by reference into the lease agreement, that describes in detail the equipment being leased, the lease term, commencement date, and repayment schedule.
Equity Investor or Participant An entity that provides equity funding in a leveraged lease transaction. It also is known as the owner or ultimate lessor of the leased equipment.
Evergreen Lease Evergreen Lease A lease that self-renews each period unless the lessee gives notice of its termination within a specified period of time. Evergreen Lease
Executory Costs Recurring costs in a lease, such as insurance, maintenance, and taxes for the leased property, whether paid by the lessor or the lessee.

Term Definition
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Fair Market Value (FMV) The technical definition of fair market value is the price a willing buyer will pay a willing seller for leased property on an "as is, where is" basis with both under no compulsion to either buy or sell. In practice, the FMV is often a topic of much discussion because the Vendor and the Leasing company often have very good data regarding the projected Fair Market Value at a given point of time. Since the projected FMV has a direct impact on the financial proposal a lessee receives from a lessor, this value should be carefully considered in entering into a lease agreement.
Fair Market Value Purchase Option Similar to a purchase option, this lease term gives the lessee the ability to purchase the leased property at its fair market value at the end of a lease.
FASB 13 Financial Accounting Standards Board Statement No. 13, ‘Accounting for Leases’. This statement specifies the proper classification, accounting, and reporting of leases by lessors and lessees.
Finance Lease An expression often used in the industry to refer to a capital lease or a nontax lease.
Financial Accounting Standards Board (FASB) This is the group that determines the general accounting policy and theory which is to be followed by both internal accountants as well as external auditors.
Financial Institution Lessor A type of independent leasing company that is owned by a financial institution such as a commercial bank, thrift institution, insurance company, industrial lease company, or credit union.
Financial Statements Accounting statements that provide specific information about a company's financial position. They include the Profit & Loss Statement, also known as the Income Statement, the Balance Sheet, and the Statement of Cash Flows. Financial statements can generally be audited by an outside CPA firm or be unaudited and, thus, prepared by the company. Leasing companies typically like to rely on audited financial statements.
Financing Statement This is a document specified under the Uniform Commercial Code (UCC), a law applicable in all states. This puts the world on notice that a security interest has been filed against the person on the form listed as the debtor; also known as a UCC-1
Full Payout Lease A lease in which the lessor recovers, through the lease payments, all costs incurred in the lease, plus an acceptable rate of return, without any reliance upon the leased equipment’s future residual value.
Full Service Lease A lease that includes additional services such as maintenance, insurance, and property taxes that are paid for by the lessor. The cost of these services is included in the lease payments.
Funding Source An entity, such as a lessor or a bank, that provides any part of the funds used to pay for the cost of the leased equipment.

Term Definition
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Gross Pretax Yield The yield calculated in a lease before considering tax benefits and costs of doing business such as bad debt and general and administrative expenses.
Guaranteed Residual Value A guarantee by the lessee, or an unrelated third party (e.g., equipment manufacturer, insurance company), to the lessor that the leased equipment will be worth a fixed amount at the end of the lease. The guarantor agrees to reimburse the lessor for any shortfall between the leased equipment’s salvage amount and the guaranteed residual value.

Term Definition
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Half-Year Convention A tax depreciation convention that assumes all equipment is purchased or sold at the midpoint of the tax year. This convention allows an equipment owner to claim a half-year of depreciation deductions in the year of acquisition, as well as in the year of disposition, regardless of the actual date within the year that the equipment was placed in service or disposed of.
Hell or High Water Clause This is a provision in a lease agreement which indicates the lessee is required to pay the lease payment for the entire term of the lease. Problems encountered by the lessee with the leased property are not valid reasons for not making lease payments.

Term Definition
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Implicit Rate The discount rate that, when applied to the minimum lease payments (excluding executory costs) together with any unguaranteed residual, causes the aggregate present value at the inception of the lease to be equal to the fair market value of the leased property. The implicit rate is used in the 90% test of FASB 13.
Inception of a Lease The date of the lease agreement (or commitment, if earlier).
Incremental Borrowing Rate The interest rate a company expects to pay for its next borrowing.
Independent Lessor A leasing company that is independent of any one manufacturer and purchases equipment from various unrelated manufacturers.
Initial Direct Costs Costs incurred by the lessor that are directly associated with negotiating and consummating a lease. Initial direct costs include commissions, legal fees, costs of credit investigations, and the costs of preparing and processing documents for new leases.
Insured Value An agreed-upon value the insurance company will pay the beneficiary if the equipment is destroyed while on lease.
Interest The difference between the total lease payments and original lease amount (principal). Interest is to a lease as earned income is to a lease.
Interim Rent Rent paid for an interim period of time. Many leases begin at the start of a period such as the first of the month. If leased property is received and a certificate of acceptance is signed prior to that date, often there is an interim period between the acceptance and the start of the first lease rental. This period of time is called the interim term during which the interim rent is paid. The interim rent is generally calculated as a percent of the standard monthly rent prorated over the number of days in the month the lessee has use of the leased property.
Internal Rate of Return (IRR) The unique discount rate that equates the present value of a series of cash inflows (lease payments, purchase option) to the present value of the cash outflows (equipment or investment cost).
Investment Grade Credit Generally refers to a lessee of high credit standing. Technically, an investment grade credit is a company rated highly by one of many recognized credit agencies such as Standard & Poor's.
IRS Pronouncements Revenue Rulings, Revenue Procedures, and other miscellaneous documents that contain the Internal Revenue Service’s interpretation and comment on federal income tax law.

Term Definition
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Lease A contract through which an owner of equipment conveys the right to use the equipment, for a fee, to another party.
Lease Acquisition The process whereby a leasing company purchases or acquires a lease from a lease originator such as a lease broker or other leasing company
Lease Administration Those tasks performed throughout the term of the lease, in which the lessor, or subcontractor, provides for lease tracking, billing, collections, financial reporting, UCC filings, and so forth.
Lease Agreement The contractual agreement between the lessor and the lessee that sets forth all the terms and conditions of the lease.
Lease Broker An entity that provides one or more services in the lease transaction, but that does not retain the lease transaction for its own portfolio.
Lease Line A line of credit similar to a bank line of credit. It allows the lessee to easily add additional leased property under the same terms and conditions without negotiating additional agreements.
Lease Origination The process of finding, developing, and consummating lease transactions.
Lease Rate Factor This is a percentage which when multiplied by the cost provides a periodic rental. It is a helpful number when used by either a sales person or the lessee. In the event the cost of the leased property is either not exactly known or may change, having the lease rate factor allows a quick recalculation of a lease payment when that number becomes known.
Lease Term The fixed, noncancellable term of the lease.
Lease Versus Purchase A comparison of the costs incurred in obtaining the use of an asset for a specific period of time through either leasing or purchasing. Costs are typically compared on an after-tax, present value basis. This analysis sometimes is referred to as lease versus buy.
Lessee The user of the equipment being leased.
Lessee’s Incremental Borrowing Rate The interest rate the lessee would have incurred (at the inception of the lease) to borrow, over a similar term, the funds necessary to purchase the leased assets.
Lessor Depending on the type of lease, either the owner of the leased property or the owner of a security interest in the leased property.
Letter of Credit A specific arrangement between a lessee and one of its banks. The bank agrees in the event of a defined event, the lessor can look to the bank to make payment instead of the lessee. This is similar to a security deposit in that it is one way for a lessor to insure that it will be paid under a lease.
Leverage The amount borrowed in relationship to the amount of equity a company uses to buy its assets.
Leveraged Lease A lease in which the lessor borrows a significant portion of the equipment cost on a nonrecourse basis. The lessor puts up a minimal amount of its own equity and is generally entitled to the full tax benefits of equipment ownership.

Term Definition
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Maintenance Contract An agreement with another party to maintain and repair the leased property during the lease term.
Master Lease Agreement The primary document between the lessor and lessee containing all the general terms and conditions for leasing. Individual leases can then be relatively short and incorporate the master lease by reference. It is a very convenient administrative document so that once agreed, legal terms and conditions never need to be negotiated again.
Match Funded Debt Debt, incurred by the lessor, to fund its leased equipment, the repayment of which is structured to correspond to the amortization of the lease portfolio.
Middle Market Credit A lessee without an investment grade credit rating, but generally with sales greater than $50 million annually.
Midquarter Convention A depreciation convention that assumes all equipment is placed in service halfway through the quarter in which it was actually placed in service.
Minimum Lease Payments From the lessee perspective, all payments that must be, or are required to be, made to the lessor. Minimum lease payments for the lessor include all payments to be received from the lessee, as well as any residual guarantees by unrelated third parties.
Modified Accelerated Cost Recovery System (MACRS) The current tax depreciation system as introduced by the Tax Reform Act of 1986, generally effective for all equipment placed in service after December 31, 1986.
Money-Over-Money Lease A nontax lease in which the lessee is, or will become, the owner of the leased equipment by the end of the lease term.
Municipal Lease Same as a capital lease except that the lessee is a public entity. Although the product and features are identical, the legal documentation is different because of the unique status of public entities. The lessor’s interest earnings on a municipal lease are exempt from federal income tax.

Term Definition
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Net Lease Any lease where all costs in connection with the use of the leased property are paid by the lessee and are not part of the periodic lease payments. For instance, maintenance, insurance and taxes are paid directly by the lessee. Capital leases are generally net leases.
Net Present Value The discounted value of all cash inflows and outflows from a project or investment.
Nonrecourse Debt A borrowing in which the borrower (i.e., a lessor funding a lease transaction) is not at-risk for the borrowed funds. The lender expects repayment from the lessee and/or the value of the leased equipment.
Nontax Lease A lease in which the lessee is, or will become, the tax owner of the leased equipment. As the owner, it is entitled to all the risks and benefits (including tax benefits) of equipment ownership.
Number of Payments The total number of scheduled periodic payments also called the lease "term".

Term Definition
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Off Balance Sheet Financing Any form of financing, such as an operating lease, that, for financial reporting purposes, is not required to be reported on a company’s balance sheet.
Operating Lease From a financial reporting perspective, a lease that has the characteristics of a usage agreement and also meets the criteria established by the FASB. Operating leases also include leases in which the lessor has taken a significant residual position in the lease pricing. With an operating lease, the lessor is generally taking a risk that at the end of the term the lessee will either purchase the leased property, renew the lease, or the leasing company can remarket the leased property for its residual value.

Term Definition
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P.U.T. Option Purchase Upon Termination, a requirement that the lessee purchase the equipment at the end of the lease for a predetermined amount.
Packager A leasing company, investment banker, or broker that arranges a leveraged lease.
Payments in Advance A payment stream in which each lease payment is due at the beginning of each period during the lease.
Payments in Arrears A payment stream in which each lease payment is due at the end of each period during the lease.
Payoff An event in which the lessee purchases the leased asset from the lessor prior to the end of the lease term.
Personal Guarantee The guarantee of someone to be individually responsible for the obligations under the lease. Generally for Subchapter S closely held companies and small businesses, a leasing company may ask for a personal guaranty as a way to insure that the lease payments will be made.
Placed in Service The date equipment is available and ready for use.
Point One percent, or one percentage point (1.00%); also represents 100 basis points.
Pooled Funds A funding technique in which the lessor pools, or groups, several forms of borrowing to fund its leases.
Portfolio The entire group of leases in which a lessor has invested.
Present Value The discounted value of a payment or stream of payments to be received in the future. Present value represents the principal in a series of future cash flows.
Pricing The process of computing the periodic lease payment.
Purchase Option An option in the lease agreement that allows the lessee to purchase the leased equipment at the end of the lease term for either a bargain amount, a fixed amount, or the fair market value of the leased equipment.

Term Definition
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Rate Factor A percentage amount that, when multiplied by the original equipment cost, produces the monthly rental.
Rate of Return The yield, or earnings of an investment. It typically is stated on an annual basis as a percentage.
Recourse Debt A lease in which the seller of the equipment (manufacturer) agrees to pay the lease in-full in the event the lessee defaults.
Refundable Security Deposit An amount paid by the lessee to the lessor as security for fulfillment of all obligations outlined in the lease agreement. The deposit is refunded to the lessee once all obligations have been satisfied.
Remarketing The process of selling or re-leasing leased property which has been returned to the lessor either at the end of the term or as a result of a default in lease.
Remarketing Fee A fee paid for selling or re-leasing leased property.
Renewal Option An option in the lease agreement that allows the lessee to extend the lease term for an additional period of time beyond the expiration of the initial lease term.
Rent Holiday A period of time in which the lessee is not required to pay rents. Typically, the foregone rents are capitalized into the remaining lease payments.
Repossession A situation in which a lessor reclaims and physically removes the leased equipment from the control of the lessee, usually as a result of payment default.
Request for Proposal (RFP) A document outlining the lessee’s lease financing needs. It is sent to various lessors requesting that they prepare and submit a lease proposal. The request may include equipment specifications, length of term, and end-of-term options.
Residual Value The value, either actual or expected, of leased equipment at the end, or termination, of the lease.
Residual Value Guarantee A guarantee, obtained by the lessor from another party, that the residual value will be worth a certain preset amount at the end of the lease term.
Residual Value Insurance An insurance policy stating the guaranteed residual value on leased equipment. The insurance company pays if the residual is not realized.
Retained Transaction A lease transaction or investment kept for one’s own portfolio.
Return on Assets (ROA) A common measure of profitability based upon the amount of assets invested. ROA is equal to the ratio of net income to total assets.
Return on Equity (ROE) A measure of profitability related to the amount of invested equity. ROE is equal to the ratio of net income to owners’ equity.
Rollover A refinancing of the old lease as a result of a change in equipment, such as in a takeout or upgrade.
Rule of 78 An accelerated method of allocating interest in a lease (or a loan) based upon the sum-of-the-years method.
Running Rate The rate of return to the lessor (or cost to the lessee) in a lease, based solely upon the initial equipment cost and the periodic lease payments, without any reliance on residual value, tax benefits, deposits, or fees.

Term Definition
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Sale-Leaseback A transaction that involves the sale of equipment to a leasing company and a subsequent lease of the same equipment back to the original owner, who continues to use the equipment.
Salvage Value The expected or realized value from selling a piece of equipment.
Schedule A listing of equipment subject to a lease that describes the equipment, the payment, the lease term, the commencement date, and the location of the equipment.
Security Interest An interest in property that is acquired for purpose of securing payment of a lease obligation. A security interest allows the holder of the security interest to obtain the property in the event of default and gives the holder additional rights in the event of bankruptcy.
Single Investor Lease A lease in which the lessor is fully at-risk for all funds (both equity and debt) used to purchase the leased equipment.
Skipped-Payment Lease A lease that contains a payment stream requiring the lessee to make payments only during certain periods of the year.
Small Ticket Market That portion of the overall leasing marketplace that concentrates on leasing lower-priced equipment. The cut-off point between the small ticket and middle markets ranges from 25,000 to 100,000, depending upon individual firms’ interpretations.
Spread The difference between two values. Spread is generally used to describe the difference between the lease interest rate and the interest rate on the debt used to fund the lease.
Step-Payment Lease A lease that contains a payment stream requiring the lessee to make payments that either increase (step-up) or decrease (step-down) in amount over the term of the lease.
Stipulated Loss Value This is a term in a lease requiring the lessee to pay the value of the leased property in the event there has been some type of damage or destruction to the leased property.
Stipulated Loss Value Table A schedule included in the lease agreement, generally used for purposes of minimum insurance coverage, that sets forth the agreed-upon value of the leased equipment at various points throughout the lease term.
Straight-Line Depreciation A method of depreciation (for financial reporting and tax purposes) in which the owner of the equipment claims an equal amount of depreciation in each year of the equipment’s recovery period.
Structuring The process of pulling together the many components of a lease. Structuring includes, but is not limited to, lease pricing, end-of-term options, documentation issues, funding, and residual valuations.
Sublease A transaction in which leased property is re-leased by the original lessee to a third party, and the lease agreement between the two original parties remains in effect.
Substance Versus Form A concept that implies that the form of a document is subordinate to the economic substance of the transaction.

Term Definition
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Takeout A lease option in which the lessor replaces existing leased equipment with either different equipment or newer equipment of the same make.
Tax Lease A generic term for a lease in which the lessor takes on the risks of ownership (as determined by various IRS pronouncements) and, as the owner, is entitled to the tax benefits of ownership.
Tax-Exempt User Lease A type of tax lease available to tax-exempt or nonprofit entities in which the lessor receives only limited tax depreciation benefits.
Term Generally leases run for 12, 24, 36, 48 or 60 months.
Terminal Rental Adjustment Clause (TRAC) A lessee-guaranteed residual value for vehicle leases (automobiles, trucks, or trailers), the inclusion of which will not disqualify the tax status of the lease.
Termination Value The value, representing the lessee’s liability, in the event the agreement is terminated for whatever reason.
Third-Party Lessor An independent leasing company (or lessor) that writes leases involving three parties: 1) the unrelated manufacturer, 2) the independent lessor, and 3) the lessee.
Ticket Size The cost of equipment being leased. The leasing marketplace is roughly segmented into the small, middle, and large ticket markets.
Total Cost The sum of all periodic payments which includes any fees and interest paid over the term of the lease.
True Lease A lease, also called a tax lease, in which, for IRS purposes, the lessor qualifies for the tax benefits of ownership and the lessee is allowed to claim the entire amount of the lease rental as a tax deduction.
Two-Party Lessor A captive leasing company (or lessor) that writes leases involving two parties: 1) the consolidated parent and captive leasing subsidiary, and 2) the lessee or end-user of the equipment.

Term Definition
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UCC Financing Statement (UCC-1) A document, under the UCC, filed with the county (and sometimes the secretary of state) to provide public notice of a security interest in personal property.
Unguaranteed Residual Value The portion of the residual value for which the lessor is at-risk.
Uniform Commercial Code (UCC) A set of standard rules, adopted by all the states, that governs commercial transactions.
Upgrade An option that allows the lessee to add equipment to existing leased equipment in order to increase its capacity or improve its efficiency.
Useful Life The period of time during which an asset has economic value and utility.

Term Definition
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Vendor An entity that provides leased property to customers.
Vendor Leasing A working relationship between a leasing company and a vendor to provide leasing to the vendor's customers. In some sense, the leasing company is working as an extension of the vendor providing credit checking, billing and collecting documentation, and customer service. The leasing company, generally, is accepting the credit risk.

Term Definition
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Wet Lease A lease in which the lessor provides bundled services, such as the payment of property taxes, insurance, maintenance costs, fuel, or provisions. It may even provide someone to operate the leased equipment.

Term Definition
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Yield The rate of return to the lessor in a lease investment.