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Below
is some general leasing terminology that may help you
understand the process a little better.
A
| B | C | D
| E | F | G
| H | I | L
| M | N | O
| P | Q | R
| S | T | U
| V | W
A
Activation
The
process when a lessor makes your agreement live and
the initial rental will be taken on the lease. CCL will
have received all the correct paperwork from the customer
(lessee) and the supplier (reseller/dealer) and the
supplier's invoice will be paid.
Add-On
The
addition of new equipment to the equipment already on
a lease agreement (with the same lessor). This is achieved
by way of a new agreement for the additional equipment
and only one DDM is taken.
Arrears
An
agreement is considered to be in arrears when the rental
due date has passed without the rental due having been
paid by the customer. Arrears are normally classified
by the number of days which have passed from the due
date without the rental being paid (that is, days in
arrears).
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B
Board
Resolution
This
is a document conveying the Board of Director's approval
of a specific action, such as empowering an individual
to sign an agreement.
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C
Capital
Allowances
These
are tax allowances which the owner of equipment is entitled
to claim against their taxable incom.: When the agreement
is a lease agreement, the lessor claims the capital
allowances. When the agreement is a Purchase Plan or
Lease Purchase the customer is deemed to be the owner
and is thus able to claim the capital allowances.
Certificate
of Acceptance
A
document whereby the lessee acknowledges to CCL that
the solution to be leased has been delivered and allows
the lease agreement to be started.
Consumer
Credit Act - 1974
This
act lays down certain requirements for the protection
of sole traders and partnerships where the total of
the minimum payments due under a hire or lease agreement
is £25,000 or more (including VAT). Further information
can be obtained from any Trading Standards office.
Consumer
Credit Act Licence
This
must be held by any company who wishes to offer credit
facilities.
Credit
Line
A
credit line may be established for a customer when CCL
anticipate that they will sign several agreements within
the next year. The amount of equipment cost the customer
will rent is estimated. Subject to the financial status
of the customer, CCL can approve a credit line equal
to that amount. Then, as individual contracts are signed
and sent in, the credit review process is minimised
until the approved credit line is used up.
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D
Default
A
customer who is in violation of any term or condition
of the agreement, including, but not limited to, arrears.
Deferral
An
active CCL agreement where the first payment is deferred
(usually by 3 months). This is particularly of use to
lessees who have come to the end of their budget period,
but want to have access to new technology before a new
financial year or the equivalent commences. In the case
of a three year agreement the lessee is thus contracted
for 39 months as opposed to 36 months.
Depreciation
Write-offs
For
accounting purposes to represent the consumption of
an asset over its useful life. Under a finance lease,
the customer must account for the asset as a capital
item, following the accounting rules for fixed assets.
The systematic writing off of an asset's value (by reducing
a company's taxable income) reflects its wearing out
through use and the passage of time.
Due
Date
The
date of the month on which a customer's rentals will
be collected by direct debit, or will be expected by
cheque.
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E
Economic
Life (of leased equipment)
The
estimated period during which the equipment is expected
to be economically usable by one or more users, with
normal repairs and maintenance, for the purpose for
which it was intended at the inception of the lease.
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F
Fixed
Assets
Tangible
or 'real' assets used in a business for a number of
years for profit generation and not held for resale.
Fixed
Term Rental Agreement
There
can be no secondary period on this sort of contract
and the equipment has to be returned at the end of the
agreement.
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G
Gearing
A
key ratio for assessing a company's stability and credit
worthiness. Gearing is the amount of the company's finance
which has been borrowed as a percentage of net worth.
Lending to a highly geared company involves a higher
degree of risk.
Guarantee
A
written guarantee that confirms that a third party (either
individual or company) will guarantee the customer's
obligations under the CCL agreement if the customer
becomes, for any reason, in default under the terms
and conditions of the agreement.
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I
Initial
Period/Minimum Period/Primary Period
The
CCL agreement initial period begins on payout to the
reseller by CCL and continues until the customer has
made all the payments and fulfilled all its obligations
in the term of the agreement specified in the document.
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L
Landlord's Waiver
A
document which protects a lessor's equipment from being
considered part of a property and thus irremovable.
This document primarily protects the lessor's rights
to the leased equipment, when permanently installed
in a lessee or landlord's building.
Lease
A
contract through which an owner of equipment (the lessor)
conveys the right to use its equipment to another party
(the lessee) for a specified period of time (the lease
term) for specified periodic payments.
Lease Term
The
contracted minimum period of the agreement including
any secondary period.
Lessee
The
user of the equipment being leased.
Lessor
The party to a lease agreement, who has legal title
to the equipment, grants the lessee the right to use
the equipment for the lease term and is entitled to
receive the rental payments.
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M
Minimum
Period
See Initial Period.
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P
Payment in Advance
Periodic
payments are due at the beginning of each period.
Payment
in Arrears
Periodic
payments are due at the end of each period.
Present
Value (PV)
Value
today of a future payment, or stream of payments, discounted
at the appropriate rate.
Primary
Period
See Initial Period.
Purchase
Order
A
document from CCL addressed to the reseller giving them
the authority to supply the equipment to the customer.
Purchase
Plan
An
agreement where the customer wishes to own the equipment
at the end of the Lease Term.
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R
Renewal
Rentals
The
rentals which are due in the secondary period of the
agreement.
Rental
The
sum paid by a lessee at regular specified intervals
during the period of the agreement in return for use
of rented equipment.
Rental
Agreement
A
contract between the lesser and a customer for the hire
of a specific asset selected by the lessee and supplied
by a vendor. The asset is sold by the reseller to the
Lesser who retain the ownership of the asset. The customer
has possession and use of the asset in return for payment
of specified rentals over the lease term.
Rental
Profile
The
frequency and number of rental payments.
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S
Sale
and Leaseback
A
transaction in which used equipment is purchased from
the lessee by the lessor. Title to the goods passes
from the lessee to the lessor and the equipment is then
leased back to the same lessee on normal commercial
leasing terms. Care is exercised to ensure that the
lessor has good title to the equipment before leasing
begins. Not valid in Scotland.
Sales
Aid Leasing
A
facility offered to manufacturers and suppliers (vendors)
of equipment that enable them to make it easier for
their customers to acquire their goods. The vendor is
usually able to negotiate a sales aid package which
gives greater benefits in terms of flexibility, pricing
and availability than an individual customer could negotiate
on his/her own behalf. Also known as a vendor programme.
Schedule
of Equipment
A
schedule is the part of a CCL agreement which specifies
all the equipment details.
Secondary
Period
At
the end of the minimum period, the lease may be extended
for a secondary period. The rental for this secondary
period is the same as during the minimum period, unless
the customer has negotiated a reduced rate. If the equipment
is returned at the end of the minimum period, no secondary
rentals are payable. There is no secondary period on
a Fixed Term Rental Agreement.
Settlement
Figure
This
is a sum needed to settle a lease. It can be added into
the invoice value for a new agreement and the rentals
are then calculated on the new agreement value plus
the settlement figure. This settlement figure is paid
either by the lessee or the vendor to the original lessor.
Step
Rental
A
feature of a lease that contains a payment stream that
either increases (step-up) or decreases (step-down)
in amount over the term of the lease.
Subsidiary
Legal
entity whose equity is owned by a "parent."
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T
Termination
Payments
Amounts
due from a lessee to a lessor at the end of a lease.
Such payments usually arise where a lease is terminated
early:
•
by the lessee's choice,
or
• by default.
Terms
and Conditions
The
terms and conditions of each Rental agreement set out
the rights and obligations of Lesser and the lessee.
Trading
As (T/A)
The
trading name under which a lessee is doing business.
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U
Upgrade
A
method of adding to or changing the equipment on a lease
agreement. There are various different methods of upgrading.
Useful
Life
The
period of time during which an asset will have economic
value and be usable. The useful life of an asset is
sometimes also referred to as its economic life.
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V
Vendor
The
supplier of the equipment in a leasing transaction.
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W
Writing-Down
Allowance
The
amount of the asset's cost which the owner may charge
each year against its taxable income.
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