Bargain Purchase Option – An option to purchase the equipment at the end of the lease for less than its market value.  Typically this is an amount of $1.

Capital Lease – A lease that transfers ownership from the lessee to the lessor for a major part of its useful life, and there is a reasonable assurance that the lessee will purchase the equipment at the end of the lease.

Conditional Sales Contract – This is an obligation whereby possession of the equipment has been transferred, but ownership passes only after the sale meets certain conditions, such as full payment for the equipment.

Delivery & Acceptance (D&A) – A document signed by the lessee acknowledging that they have taken delivery and the equipment is in acceptable condition.  After the D&A has been signed, the lease commences and the lessor pays the vendor for the equipment.

FMV Purchase Option Lease (Fair Market Value) – At the end of a FMV lease, the FMV is a price a willing buyer will pay a willing seller for the equipment on an as is, where is basis.

Fixed Purchase Option – An option at the end of a lease and after all lease payments have been made that allows the lessee the opportunity to purchase the equipment from the lessor at a pre-determined price. 

Insurance Certificate – Even though the lessee does not “own” the equipment during the lease, the lessee normally is required to provide physical damage and liability coverage on the equipment and list the lessor as Additional Insured and Loss Payee.

Lease Agreement – Is a contractual agreement between a lessor and lessee that outlines all of the terms and conditions of the lease.  It is a binding agreement between the two parties.

Lessor – The owner of the equipment who grants the lessee the right to use the equipment for an agreed upon term and price.

Lessee – The individual or business that is leasing the equipment from the owner, the lessor.

Lease Line – A pre-approved line of credit from a lessor that allows the lessee to acquire equipment for lease during the year.  Normally some restrictions are set as to the type (for example age or condition) of equipment that is eligible.

Operating Lease – This is a lease that is similar to a rental agreement but meets certain criteria by the FASB (Financial Accounting Standards Board).  This type of lease is used more often by large companies and is not required to be shown on a balance sheet.

PRO Lease (Purchase, Renewal Option) – A type of lease that allows the lessee to either purchase the equipment at the end of the lease or re-new the lease at a pre-determined price.  The lessee is not allowed to return the equipment to the lessor at the end.

PUT Option (Purchase Upon Termination) – This is a specialized option at the end of a lease that requires the Lessee to purchase the equipment (can not be renewed or returned) at the end of the lease.

Sale Lease Back – An arrangement for re-capturing cash previously paid for equipment by selling the equipment to a lessor who in turn, leases it back to the original owner over an extended period of time.

Tax Lease – This is a true lease for Federal tax purposes which allows the lessor to claim all tax benefits on the leased equipment.

TRAC Lease (Terminal Rental Adjustment Clause) – Is normally used for all titled vehicle and trailer leases and may also be used for self propelled sprayers. It normally contains an end of lease adjustment clause that has special provisions for “wear and tear’ on the equipment.