Leasing Terminology

This is the lessee’s acknowledgement that the equipment being leased has been received and is in acceptable condition.  Wagon Leasing will not fund a transaction until we have your assurance that the equipment meets or exceeds your expectations.

Advance Lease Payments
Contract payments made in advance.  Most leases require one or two payments at closing.  These payments reduce the remaining number of payments due under the terms of the contract.   The typical lease requires one or more payments at closing.  These payments are in lieu of more substantial down-payments required under a loan transaction.

End of Lease Options
The typical options at the end of a lease are:  $1 Buyout, Fair Market Value (FMV), PUT (purchase upon termination), return of equipment, and continued leasing.

The leases offered by Wagon Leasing will include either PUT (the TRAC purchase option) or Fair Market Value.  Wagon Leasing will consider continued leasing upon the customer’s request.

Fair Market Value Lease
A lease agreement which allows for:

  • Return of the equipment at the end of the lease with no further obligations
  • Equipment may be purchased at the end of the lease at the Fair Market Value
  • Equipment may be re-leased at the current Fair Market Value

Leased equipment will be owned by the lessor.  As such, all equipment is required to have physical damage insurance showing Wagon Leasing as the “named insured”.  Liability insurance will also be required.  The amount of the insurance will depend on the type of equipment.  Wagon Leasing will be named as “additional insured”.

The party (customer) that is leasing the equipment.

The owner of the equipment (Wagon Leasing).

Operating Lease
Also known as Fair Market Value Lease.  See above.

A special purchase option that requires the purchase of the equipment at the end of the lease.  The purchase price is determined in advance (at the origination of the lease).

Rate Factor
The rate factor is the means by which the lease payment is determined.  The factor is typically expressed in five digit decimal format.  Once the total equipment costs has been determined, multiply the total cost by the factor.

Residual Value
The estimated market value at the end of the lease.

TRAC Lease
“Terminal Residual Adjust Clause”.   TRAC leases have many of the same benefits of a true lease.  The tax code has special provisions that allow TRAC Leases to offer a set end-of-lease purchase option (like a PUT) while maintaining the status of a true lease.  TRAC Leases are only applicable to vehicles and trailers.