Dictionary of leasing terminology

Finding the right lease for your school can be a bit confusing – especially when there’s a lot of technical jargon involved. So we’ve created a dictionary of leasing terminology to help you through the process.

Take a look:

Dictionary of leasing terminology

Advance payments – Either payment made at the beginning of the lease or used in the context of payments due at the beginning of each payment period e.g. monthly payments payable ‘monthly in advance’.

Asset management – Transport, maintenance and upkeep of leased items.

Boilerplate provisions – Standard terms found in every lease agreement.

Delivery & Acceptance certificate – A critical piece of documentation; shows the lessee has accepted equipment and lease can begin.

Finance lease – Also known as ‘capital lease’. Assets must be shown on a school’s balance sheet and schools can only enter into these types of lease with prior approval from the Department for Education.

Cost of funds – Interest rate at which the funder (a.k.a. lessor) can borrow.

Deferred payment – Postponement of payment which can occur throughout the lease. Initial payment could be deferred for 12 months, then each subsequent payment is also deferred.

Early termination – When a lease ends before the end of its term. If you wish to terminate your lease early, you can expect to pay a termination sum.

Equipment schedule – Document describing all leased assets in detail, and their delivery/maintenance.

Full-service lease – Includes additional services, such as maintenance and insurance, paid for by the lessor. Also known as an ‘operating lease’.

Funding source – A company or bank that will be paying the vendor. Utility Rentals is self-funded, and will always be the funder of your equipment.

Hard costs – Tangible items included in a lease (e.g. equipment).

Installation – Equipment placed/installed by lessor’s representatives. Usually included as part of the lease.

Lease agreement – Contractual terms governing the lease.

Lease payments – Periodic amounts paid by the lessee to the lessor. Also known as rental payments.

Lease term or period – Minimum fixed duration of the lease in which rental payments will be made.

Lessor – The funding source; in this case, Utility Rentals.

Lessee – Business/principals signing the lease; your school E.g. the user of the equipment

Market price of equipment – The cost of equipment on the open market.

Operating lease – All schools can use this lease; it is a form of ‘off-balance sheet’ funding. Also known as ‘full-service lease’.

Rental Agreement – Another name for an operating lease

Rental profile – Nature of your agreement (how big a deposit, how long it takes, size of repayments, payment period etc.).

Residual value – Lessors calculated value of the equipment at the end of the lease.

Service contract – Agreement between either the manufacturer and lessor, or lessor and lessee, covering maintenance and servicing of equipment over a specified period.

Soft costs – Intangible items such as freight, labour (including installation), ongoing warranty and service contracts, and software.

Total cost – Overall cost paid during leasing period.

Warranty/Maintenance Agreement – Also known as ‘parts and labour breakdown warranty’. Issued by manufacturer or lessor, this is a promise to repair or replace equipment if necessary, within a specified time frame.

Hopefully, this has cleared a few things up for you, so you can make an informed decision on which lease is right for your school.

If you need a little more information, get in touch with our friendly experts today!