$1 buyout lease: At the
end of the lease, you can purchase the leased equipment for $1.
Your monthly payments will be higher in this case.
Deferred payment lease:
A payment schedule that allows you to defer your first payment by
60 or 90 days. This is an example of the flexibility leasing
offers.
Economic/useful life:
The time period during which equipment will retain value. Most
high-tech equipment has an economic life of no more than five
years.
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Equipment schedule: A
document provided by a lessor detailing the terms of the lease,
your payment schedule and the equipment being leased.
Fair market purchase
option: At the end of your lease, one of your purchasing
options is to buy the equipment at its fair market value.
Master lease: If you
already have a lease in place and want to lease additional
equipment, you can avoid negotiating a new contract by using the
same terms as on your initial lease, making it a master lease and
saving you time and money.
Modern equipment
substitution: A provision that can be negotiated into
your lease so you don't end your lease when the equipment
becomes outdated, but rather have it replaced with newer equipment
during the lease term.
Purchase option: A
provision written into the lease that gives you the option of
buying the equipment at the end of the lease. The price can be the
fair market value, or you can decide on a price when you negotiate
your lease.
Residual value: The
value of your equipment at the end of a lease.
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Originally published in the January 2001 issue of Entrepreneur Magazine
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