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What is an independent lessor?

An independent lessor is a leasing company that is not an affiliate, joint venture or associate of a bank, manufacturer or dealer.  They purchase equipment from various unrelated m…


What is an equity participant in a leveraged lease?

The lessor is the equity participant, which is one or more parties in a leveraged lease that as owner of the leased asset holds beneficial interest in the asset and has the risk, r…


What is an equipment lease agreement?

Whether lease applications or lease proposals and commitment letters are used, lease inception occurs with the closing of lease agreements.  A lease agreement is a contract between…


What is an asset-backed security?

An asset-backed security (ABS) is a marketable security that is issued by a special purpose vehicle (SPV) that buys financial receivables, such as automotive leases and mortgage lo…


What is a true lease?

A lessor can claim the tax benefits of a leased asset only if it is a true lease.  A true lease is any lease that allows the lessor to claim the tax benefits of ownership of a leas…


What is a titling trust?

A lease titling trust is an SPV used in the securitization of leased motor vehicles that allows the sponsor lessor to transfer its beneficial rights to receive cash flows from the…


What is a syndication agreement?

A syndication agreement is a contract between the arranger and the other participants in the syndication of a lease that addresses the structure of the syndicate, how the transacti…


What is a sublease?

A sublease is an arrangement between a rental property’s principal tenant and a subtenant, whereby the lease agreement between the landlord and the tenant remains in force and gove…


What is a servicing agreement?

A servicing agreement is a contract between a servicer and a special purpose vehicle (SPV) or an assignee under which the servicer is responsible for administering a lease and acti…


What is a service lease?

A service lease is an arrangement where the owner and lessor of the equipment maintains and services the asset and allows the asset operator operational flexibility by permitting t…


What is a security deposit?

A security deposit is an amount of cash provided by a lessee to the lessor at inception of a lease for lessor protection against defaults, delays or other failures of performance b…


What is a security agreement?

A security interest arises when debtor agrees in a security agreement that the secured party may take specified collateral that is owned by the debtor if the debtor breaches the ag…


What is a sale-leaseback?

A lease transaction that involve the sale of an asset and the leasing back of the same asset either before or after the asset is put into use is a sale-leaseback.  An equipment sal…


What is a residual value guarantee? What is the stipulated loss value of a lease?

At the end of the lease term, a leased asset is equal to the residual value.  Residual value can be either unguaranteed or guaranteed by the lessee or a party related to the lessee…


What is a residual sharing agreement?

A contract between a lessor and its assignee whereby the proceeds in excess of a specific amount received by the lessor upon the sale or re-lease of the leased asset following the…


What is a repurchase agreement?

A repurchase agreement is a contract between a vendor and a lessor requiring the vendor to buy back leased equipment that was purchased from the vendor, often in the event of the l…


What is a remarketing agreement?

A remarketing agreement documents a contractual arrangement under which a vendor agrees to help sell equipment when it goes off-lease at the end of its lease term or earlier due to…


What is a nontax lease?

A nontax lease is any lease in which the lessee is considered the owner of the leased asset for tax purposes, it being treated as a loan in which the lessor has a security interest…


What is a nonservice lease?

A nonservice lease is an equipment lease under which the lessee is responsible for the maintenance, insurance and taxes as well as all other costs incurred in operating the equipme…


What is a minimum lease payment? What is a rental?

A periodic payment made by the lessee to the lessor during the lease term for use of the leased asset, usually monthly or quarterly, is a lease payment.  The periodic payment made…


What is a master equipment lease agreement?

Many equipment lease transactions use a master lease to cover terms and conditions of all of the individual lease transactions to be entered into between the parties.  A master lea…


What is a leveraged lease?

A leveraged lease is a noncancellable long-term big-ticket finance lease that relies on long-term debt provided to the lessor for the leased asset’s refinancing, it involving the l…


What is a lessor’s investment in a lease?

The sum of the undiscounted minimum lease payments (MLPs) to be made on a finance lease plus any unguaranteed residual value (URV) accruing to the lessor is the gross investment in…


What is a leasing company?

A financial institution predominantly engaged in the business of originating and underwriting lease transactions is a leasing company.  Leasing companies come in the form of bank l…


What is a lease underwriter?

A lease underwriter is a lessor, typically the lease originator, that assumes the risk of a lease and assures and arranges the transaction.  Lease underwriters commonly originate l…


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