Lease Jargon

Below please find a list of terms or “jargon” used in the leasing business. For a complete review of how of these terms relate to leasing, please e-mail Laura for a free copy of  Anatomy of a Lease.

APR…Annual Percentage Rate…the current designation of what used to be known as “true” or “simple” interest.  It is your actual cost throughout the initial lease term and allows comparison with other financing alternatives.

Capital Lease…Any lease that is not an operating lease.  (See “Operating Lease”)

Commencement Date…The date on which the initial lease term begins.  (See “Letter of Acceptance”)

Commitment Fee…An amount required by the Leasing Company prior to the commencement date, to “hold” its commitment to the lease rates and terms.  May or may not be credited to the rental obligation.

Evergreen Lease…Lease terms were misrepresented and the Hospital’s rental obligation continues longer than expected, inflating leasing costs.

Fair Market Value…An equipment value, which varies widely with types and brands, used at lease end to determine the cost of lease renewals or equipment purchase.

FASB-13…A statement by the Financial Accounting Standards Board that establishes technical criteria for leases, classifying them as operating or capital leases for accounting purposes.

Indemnification…The Hospital protects and “holds harmless” the Leasing Company from any outside legal action relating to ownership or use of the equipment.

Initial Lease Term…The non-cancelable period during which the Hospital is obligated to pay rent…exclusive of any renewal options.

Lease Agreement…A non-cancelable contract to provide and use equipment…usually with an initial term of three to five years.

Lessee…You…the Hospital…the user of the equipment.  Pronounced “less-ee”, not “lease-ee”.

Lessor…Them…the Leasing Company…the owner of the equipment.  Pronounced “less-or”…not “lease-or”.

Letter of Acceptance…A document executed and dated by the Hospital stating that the equipment is installed and acceptable…commences the initial lease term and the obligation to pay rent.

Net Lease…Provides only for use of equipment…does not include taxes, maintenance, insurance or consumables (film, reagents, etc.).

Operating Lease…A lease that meets FASB-13 criteria regarding lease term vs. useful life, purchase options, discounted lease payments, etc.

Progress Payments…Payments required by an equipment vendor before final installation and acceptance…usually with purchase order and again upon delivery.

Renewal…An extension of a lease beyond the initial term…usually at a reduced monthly rental.

Residual Value…The “in-place” value of the equipment at the end of lease.

Third Party Lessor…A leasing company operating independently of any vendor.

 Vendor…The provider of the equipment…may be the original manufacturer or a dealer/distributor.