Advance Rentals:  Any advance rentals or upfront payments paid by the lessee to the lessor for the rental of any asset will be applied to the total number of rentals due.

Bargain Purchase Option:  A purchase option which allows the lessee to obtain title to the leased equipment for less than its fair market value.

Capital/Finance Lease (Conditional Sales Contract):  A capital lease is not a true lease, but rather a sale of equipment by the lessor to the lessee.  When property is purchased it is capitalized and recorded both as an asset and as an obligation.  The lessee may be eligible for the IRS Section 179 deduction.  A capital lease meets one or more of the following criteria:

	The lessor transfers ownership to the lessee during the lease term
	The lease contains the option to purchase the asset at a bargain price
	The lease term is equal to 75% or more of the estimated economic life of the property
	The present value of minimum lease rental payments equals 90 percent or more of the fair market value using lessee's incremental cost of borrowing.

Closed End Lease:  A closed-end, or "walk-away" lease is usually structured on a net-lease basis.  At the end of the lease the property reverts back to the lessor.  Ownership possibilities are "closed" to the lessee.

Fair Market Value:  An arms length transaction.  What a seller under no undue duress is willing to sell for and what a buyer under no undue duress is willing to pay, both parties being aware of all pertinent facts come to a meeting of the minds.

Lease:  A contract between a lessor (owner of an asset) and a lessee (user of an asset) where the lessor grants the temporary possession and use of an asset to the lessee at a fixed periodic charge (monthly rental).

Money Over Money:  Basically a loan disguised as a lease.  All tax benefits of a true lease are lost.

Open-end Lease:  Generally a net-lease where the title to the asset passes to the lessee when exercising a purchase option or payment of a residual.  Ownership possibilities are "open" to the lessee.

Operating Lease (Off Balance Sheet Financing):  Any lease that is not a capital lease is defined as an operating lease.  These are generally used for short-term leases of equipment.  An operating lease cannot violate any of the 4 criteria stated in a Capital Lease.

P.U.T.:  Payment Upon Termination.  Lessee must purchase the asset at the end of the lease for a pre-determined payment or amount.

Residual Value:  Purchase option or payment to be paid before title or ownership of the leased property will be transferred to the lessee (see types of residuals below).

	Fair Market Value Residual:  The residual value is the price for which the property could be sold in light of market conditions prevailing at that time.
	Ten Percent Residual:  The residual value is equal to ten percent of the asset's original cost.

$1.00 Residual:  The residual value is $1.00

T.R.A.C. Lease:  Terminal Residual Adjustment Clause - Enables customer to set residual values and purchase the vehicle for that residual value, at lease end, while maintaining operating status.  A T.R.A.C. Lease is an exception to IRS Ruling 55-540.

True Lease:  A lease that qualifies as a lease under Internal Revenue Code Ruling 55-540, so that the lessee can claim rental payments as tax deductions and the lessor can claim the tax benefits associated with equipment ownership.   

Use Tax:  A state and county tax based on the monthly rental payment and the tax rate applicable where the equipment is located.  The tax is collected monthly up to the maximums and forwarded to the appropriate Department of Revenue, Sales and Use Tax Division.

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