Glossary of Leasing Terms
Learn about leasing.Are you new to equipment leasing, or just unfamiliar with some of the language you are seeing on your lease agreement?
Below you will find definitions for common leasing terminology.
Aggregate Lease PaymentThe base monthly lease payment multiplied by the lease term.
Commercial LeaseA lease where the equipment is used for commercial purposes only.
Consumer LeaseA lease where the equipment is used for personal / home use only.
Fair Market ValueFMV is the purchase option that is given to a customer at the end of the lease term. Typically between 7-15% of the lease receivables, it is the amount the Lessee can pay to purchase the equipment at the end of the lease term.
LeaseA contract by which one party conveys equipment to another to use for a specific term for a specific payment amount.
Lease AgreementThis document serves as the binding contract between the Lessee and Lessor. The Lessee agrees to all terms and conditions of the Lease and an authorized signer must sign on all indicated areas.
Lease Rate FactorThis is used to calculate the base monthly payment, multiply the equipment cost by the lease rate factor to calculate the monthly payment. Appropriate taxes will need to be added to get the final monthly lease payment amount.
LesseeThe Lessee is the commercial or consumer customer looking to acquire equipment through the lease (aka Equipment Buyers). The Lessee must be an authorized signer (President, CEO, VP, etc. or related party to the transaction) to sign the Lease Agreement.
LessorThe Lessor agrees to purchase the equipment from the Vendor (Equipment Seller) and arranges the financing for the Lessee. The Lessor (TimePayment) owns the equipment – the Lessee (customer / Equipment Buyer) makes monthly payments to the Lessor (TimePayment) for the equipment’s use for the term of the lease agreement.
Personal GuarantorThe individual responsible for the obligations under the lease.
TermThe fixed number of months that the Lessee will lease the equipment from the Lessor.
Want to learn more? Here are some additional resources: