Some Answers to Questions About Leasing.

Leasing is a financing agreement to "rent" vehicles or equipment for a specific period of time, and is based on the client's mileage or other special requirements. Unless there is a pre-arranged agreement between both parties, there is no transfer of ownership to the client at the end of the lease.

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The Lessee is the party or person signing the lease agreement and who takes possession of the vehicle or equipment. This person also assumes the financial responsibility to fulfill the terms of the lease as defined in the agreements.

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The Lessor is the financing institution that owns the equipment or vehicle. It is the responsibility of the Lessor to provide the lease-financing arrangements to the "end-user" who is the Lessee.

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An independent Lessor is a  company not affiliated with an equipment or vehicle manufacturer. Terry McDonald Leasing is an independent Lessor. The benefit of using an independent Lessor is having the choice of leasing any make or model, while receiving professional and unbiased financial consultation and the ability to customize a lease unique to the Lessee's particular needs.

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All leases utilize a projected lease-end value, usually referred to, as the "Residual Value." In an Open-End Lease, the Lessee assumes the risk of the value of the equipment or vehicle at the end of the lease term. If the value of the equipment or the vehicle is "less" than the pre-established residual value, the Lessee is responsible for up to three (3) monthly payments, as mandated by law. However, there is no limit on the Lessee's potential "gain" if the equipment or vehicle is sold for more than the residual value.

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In a Closed-End Lease the residual value is guaranteed to the Lessee, and he has no risk, exposure or liability if the vehicle is sold for less than the residual value at the end of the lease term. However, the Lessee is responsible for accumulated excess miles when the vehicle is returned to the Lessor. The Lessee is also responsible for excessive "wear and tear".

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The "Capitalized" cost includes ALL the money in the lease, including, the price of the vehicle, taxes and licensing fees, positive or negative trade-in considerations, as well as any associated fees payable to the Lessor or the Lessee.

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This is the amount paid up-front by the Lessee. It is capitalized into the lease for the purpose of reducing the amount financed to calculate the lease, which in turn results in either a shorter term or lower payments.

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It is the length of time...expressed in months...that has been agreed to by both the Lessor and the Lessee. Most leases reflect terms between 12 and 60 months.

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This occurs when a lease is terminated prior to the end of the scheduled term, either by being paid off by the Lessee, being Repossessed, or by the death of the Lessee. Depending on the circumstances, an early termination usually results in additional charges.

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An amount, usually equal to one monthly payment, and required in addition to the first payment. In today's market, Security Deposits are more of an exception than a rule, and are mostly encountered when there are credit issues associated with the lease application.

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This association... (NVLA)... is a non-profit, member-supported, national trade association representing the vehicle leasing industry. One of NVLA's main objectives is to sponsor and conduct educational programs designed to increase the public awareness of vehicle leasing.

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