The American Association of Equipment Lessors, based in Arlington, é produces several publications to help potential lessees understand the jargon associated with this complicated business. This glossary of lease-related terms is excerpted from “Equipment Leasing Is Good Business Here’s Why.”
Capital Lease A type of lease classified and accounted for by a lessee as a purchase and by the lessor as a sale or a financing, if it meets one of these criteria: the lessor transfers ownership to the lessee at the end of the lease term; the lease contains an option to purchase the asset at a bargain price; the lease term is equal to 75% or more of the estimated economic price of the property; or the value of minimum lease rental payments is equal to 90% or more of the fair market value of the leased asset.
Fair Market Purchase Option An option to purchase leased property ...
