U.S. equipment leasing glossary

Fair market value (FMV)

A value determined with reference to the market at the relevant time. In an FMV purchase option, the contract should explain how the amount is established. It should not be confused with a purchase price fixed at the start.

Buyout or purchase option

A contractual route to acquiring equipment. Ask whether purchase is optional or required, how the price is determined, which additional amounts are due, and when title transfers. A nominal option and an FMV option describe different economic questions.

Master lease and equipment schedule

The master agreement supplies contractual framework terms. A schedule identifies a particular acquisition and its applicable commercial details. Read them together; the framework is not automatically a commitment to finance all future purchases.

Acceptance and commencement

Acceptance documents confirm an event defined by the agreement, often involving delivery or satisfactory receipt. Commencement identifies when the relevant term or obligations start. Determine who signs and whether installation or testing must happen first.

Interim rent

Charges that may apply before a regular payment schedule begins. Ask when the period starts and ends, how it is calculated, and how it relates to delivery and acceptance. Do not assume a recurring-payment quote includes it.

Residual value

An estimate or contractual reference concerning equipment value at a later date. Its meaning depends on the transaction. An assumed future value is not necessarily a guaranteed sale price, a purchase option price, or a promise made to the customer.

Equipment finance agreement (EFA)

An ownership-oriented equipment financing arrangement. The contract determines title, security interests and payment obligations. It should not be compared with a return-oriented lease without accounting for the different intended end position.

Operating lease and finance lease

Terms used in accounting classification, with meanings determined by the applicable framework. A marketing label does not decide the accounting treatment. Under U.S. GAAP Topic 842, operating leases should not generally be assumed to stay off the lessee's balance sheet.

Sale and leaseback

A transaction in which equipment is sold and leased back for continued use. Review the sale proceeds alongside future payments and ownership or return obligations. The transaction needs its own legal, accounting and tax assessment.