iconReference Documents

CFLA strives to keep members up-to-date on the latest changes in the industry and at the Association. Plus, we’ve included reference documents to make sure you know all you need to know about the asset-based financing and leasing sector.

Leasing Glossary

Given the specialized nature of the Personal Property Security Act, terminology relating to the PPSA has been set out in a separate PPSA Leasing Glossary.

PLEASE NOTE: This document has been designed and compiled as a practical resource to assist those active in the asset-based financing, equipment and vehicle leasing industry in Canada. It does not purport to provide a comprehensive or definitive version of terms and language commonly used in the industry.

The CFLA welcomes the suggestion of additional terms or definitions of common use in the business of asset-based financing, equipment and vehicle leasing in Canada.

The terms included in the CFLA Leasing Glossary are drawn from the documentation presented by Associate Members at the following CFLA Professional Development Seminars:

  • Accounting & Tax Fundamentals for Leasing • KPMG LLP
  • Basic GST & PST for Leasing • PricewaterhouseCoopers LLP
  • Insurance Fundamentals for Leasing • Hunter, Keilty Muntz & Beatty
  • Legal Principles for Leasing • Blake, Cassels & Graydon LLP
  • PPSA • Understanding Lease Registration • Jones McCloy Peterson
  • PPSA • Understanding Lease Registration • Lafleur Brown/Gowling Lafleur Henderson LLP (Montréal)

Definitions are also taken from Leasing in Canada (Third Edition) by Ralph Selby, FCA, of PricewaterhouseCoopers LLP and the Secretary Treasurer of CFLA, published by Butterworths Canada Limited in 1999.

Additional definitions come from various publications of the U.S. Equipment Leasing Association and from Turning the Lights on Leasing, a Consumer Guide to Vehicle Leasing, a joint publication of CFLA, the Association of International Automobile Manufacturers of Canada, the Canadian Automobile Dealers Association and the Canadian Vehicle Manufacturers Association.

CFLA thanks the following Associate Members for their contribution to a better and more professional understanding of the business of asset-based financing, equipment and vehicle leasing:

  • Blake, Cassels & Graydon LLP • Toronto & Vancouver
  • Gowling Lafleur Henderson LLP • Montreal
  • Hunter Keilty Muntz & Beatty • Toronto & Vancouver
  • Jones McCloy Peterson • Vancouver
  • KPMG LLP • Montreal, Toronto & Vancouver
  • Lafleur Brown • Toronto
  • PricewaterhouseCoopers LLP • Montreal, Toronto & Vancouver

With special thanks to:

  • Butterworths Canada Limited
  • Equipment Leasing Association of America
  • Ralph Selby, FCA

Other Sources

Glossary of Frequently Used Terms, Department of Finance Canada
http://www.fin.gc.ca/gloss/gloss-e.html

Glossaire de termes courants, ministère des Finances Canada
http://www.fin.gc.ca/gloss/gloss-f.html

Glossary

APR

See Annual Percentage Rate

ASSET-BASED FINANCING

The financing of equipment and vehicles and of related items or services, primarily by way of lease, but also by secured loan or conditional sales contract. (CFLA)

ASSET SCHEDULE

A document that describes in detail the asset being leased. It may also state the lease term, commencement date, repayment schedule and location of the asset. (U.S. Equipment Leasing Association)

ANNUAL PERCENTAGE RATE

The total carrying cost paid by a consumer lessee over the term of a consumer lease expressed as an annual rate. For the purposes of statutory consumer cost of credit disclosure requirements, the APR is intended to be similar to the cost of borrowing charges on a consumer loan. (Turning the Lights on Leasing, a Consumer Guide to Vehicle Leasing)

BALLOON PAYMENTS

Larger than normal payments, usually occurring at the end of the lease term (sometimes called a “bullet”). (Leasing in Canada [Third Edition], Ralph Selby FCA, Butterworths, 1999

BARGAIN PURCHASE OPTION
[see also Bargain Renewal Option, Fair Market Purchase Option, Fixed Purchase Option, and Purchase Option]

A provision allowing the lessee, at its option, to purchase the leased property for a price which is substantially lower than the expected fair value of the property at the date the option becomes exercisable. (KPMG LLP)

A lease provision allowing the lessee, at its option, to purchase the equipment for a price predetermined at lease inception, that is substantially lower than the expected fair market value at the date the option can be exercised. (US Equipment Leasing Association)

An option given to the lessee to purchase the leased property at a price that is less than the expected fair market value so that, at the inception of the lease, it is reasonable to assume that the lessee will if acting rationally exercise the option to purchase. (Blake, Cassels & Graydon LLP)

BIG-TICKET

A market segment generally represented by lease financings over $1 million (over US$2 million in the United States - U.S. Equipment Leasing Association)

BROKER

A company or person who arranges, for a fee, transactions between lessees and lessors of an asset. (U.S. Equipment Leasing Association)

CCA

See Capital Cost Allowance

CCA RECAPTURE

See Capital Cost Allowance Recapture

CICA HANDBOOK

Authoritative handbook containing the current pronouncements of the Canadian Institute of Chartered Accountants (CICA) on specific accounting and auditing issues. See also Generally Accepted Accounting Principles.

CAPITAL COST ALLOWANCE (CCA)

Capital Cost allowance (the annual amount which a taxpayer may deduct in computing taxable income). (Leasing in Canada [Third Edition], Ralph Selby, FCA, Butterworths, 1999)

CAPITAL COST ALLOWANCE RECAPTURE

The excess of the sale price of a leased asset over the asset’s remaining undepreciated capital cost (UCC). If the sale price is less than original cost, this amount is subject to tax in full. (Leasing in Canada [Third Edition], Ralph Selby, FCA, Butterworths, 1999)

CAPITAL LEASE
[See Finance Lease; compare Operating Lease]

An accounting term meaning a lease which transfers substantially all of the risks and benefits of ownership of the leased property to the lessee. The criteria set out in the Canadian Institute of Chartered Accountants handbook provide that a lease will be treated as a capital lease if it meets any of the following criteria:

  • title passes automatically at the end of the lease term;
  • the lease contains a bargain purchase option (i.e. less than fair market value)
  • the lease term is greater than 75% of the estimated economic life of the leased property; or
  • the present value of the minimum lease payments is greater than 90% of the leased property’s fair market value at the inception of the lease.

(Blake, Cassels & Graydon LLP)

A lease that transfers substantially all of the benefits and risks incident to ownership of the property to the lessee.

(KPMG LLP)

CAPITAL TAX

Tax based on a firm’s taxable capital; tax rate varies among provinces (see also federal Large Corporation Tax) (Leasing in Canada [Third Edition], Ralph Selby, FCA, Butterworths, 1999)

CAPTIVE

A frequently-heard industry term used to describe the sales finance division or subsidiary of a manufacturer. The primary role of the captive is to provide financing to support customers in acquiring the manufacturer’s products.

CASH-FLOW-BASED CREDIT ANALYSIS

Cash-flow-based credit analysis is a primary financial innovation of asset-based financing industry. Because a leasing company retains ownership of the leased equipment or vehicle, at least until the end of the lease, it enables a lessee to qualify for use of the asset leased based on its generated cash flow rather than the lessee’s credit history, assets or capital base. (CFLA)

CERTIFICATE OF ACCEPTANCE
(Delivery and Acceptance)

A document whereby the lessee acknowledges that the equipment to be lease has been delivered, is acceptable, and has been manufactured or constructed according to specifications. (U.S. Equipment Leasing Association)

CLOSED-END LEASE
[Compare to Open-end Lease]

Used generally in vehicle leasing, in a Closed -End Lease, a lessee makes a set number of lease payments during the term of the lease and returns the vehicle to the lessor at the end of the lease term. The lessee is not required to make any additional payments unless there is physical damage to the vehicle, such as excess wear and tear, or the number of kilometres driven by the lessee is higher than the kilometre limit set out in the lease. [See also Wear and Tear]. (Turning the Lights on Leasing - Consumer Guide to Vehicle Leasing)

A lease where at the end of the lease term, the lessee is not obligated to make any adjustment payments to account for the residual value of the leased property.(Blake Cassels & Graydon LLP)

CONDITIONAL SALE
[see also Installment Sale]

A conditional sale occurs when possession of property is transferred, but ownership passes only after the sale meets certain conditions, such as full payment of the purchase price. A conditional sale is not a lease. (PricewaterhouseCoopers LLP)

CONDITIONAL SALE CONTRACT (CSC)

A sale agreement for goods by which possession of property is transferred, but ownership passes only after the sale meets certain conditions, such as full payment of the purchase price. A conditional sale is not a lease. (Leasing in Canada [Third Edition], Ralph Selby, FCA, Butterworths, 1999)

CONSUMER

“Consumer means a natural person who is offered, acquires or uses a good or service primarily for personal, family or household purposes;” Article 810 of the federal-provincial Agreement on Internal Trade (AIT).

CONTINGENT RENTAL

Rental based on a factor other than the passage of time. (KPMG LLP)

DIRECT FINANCING LEASE

A capital lease where, at the inception of the lease, the fair value of the leased property is the same as its carrying amount to the lessor. (KPMG LLP)

Capital leases which provide the lessor with financing income; the lessor is essentially a financial intermediary. (Leasing in Canada [Third Edition], Ralph Selby, FCA, Butterworths, 1999)

A non-leveraged lease by a lessor (not a manufacturer or dealer) in which the lease meets any of the definitional criteria of a capital lease, plus certain additional criteria. (U.S. Equipment Leasing Association)

ECONOMIC LIFE

Estimated remaining period during which the property is expected to be economically usable by one or more users, with normal repairs and maintenance. (KPMG LLP)

The period during which an asset is expected to have economic value to one or more users. (Leasing in Canada [Third Edition], Ralph Selby, FCA, Butterworths, 1999)

The period of time during which an asset will have economic value and be usable. (U.S. Equipment Leasing Association)

EFFECTIVE LEASE RATE

The effective rate (to the lessee) of cash flows resulting from a lease transaction. To compare this rate with a loan interest rate, a company must include in the cash flows any effect the transactions have on federal tax liabilities. (U.S. Equipment Leasing Association)

EQUITY PARTICIPANT

The owner participant, trustor owner, or grantor owner. (U.S. Equipment Leasing Association)

EXECUTORY COSTS

The costs related to the operation of the leased property (insurance, property taxes, maintenance) paid to the lessor. (KPMG LLP)

Costs related to the operation of the leased property (e.g. insurance, maintenance cost, and property taxes). (Leasing in Canada [Third Edition], Ralph Selby, FCA, Butterworths, 1999)

EXEMPT PROPERTY

There are assets that are exempt property from the April 1989 tax changes and include much office furniture and equipment, computers costing less than $1 million, furniture and equipment for residential use, automobiles, vans or trucks, most buildings and railway cars. (Leasing in Canada [Third Edition], Ralph Selby, FCA, Butterworths, 1999)

FAIR MARKET PURCHASE OPTION
[see also Bargain Purchase Option, Bargain Renew-al Option, Fixed Pur-chase Option, and Purchase Option]

An option to purchase leased property at the end of the lease term at its then fair market value. The lessor cannot retain title to the equipment if the lessee chooses to exercise the purchase option. (U.S. Equipment Leasing Association)

FAIR MARKET VALUE

The amount that a “reasonable person” would pay in a competitive market. (Leasing in Canada [Third Edition], Ralph Selby, FCA, Butterworths, 1999)

FAIR VALUE OF THE PROPERTY

The price for which the leased property could be sold in an arms’s length transaction (usually normal the selling price if manufacturer or dealer or the cost to the lessor). (KPMG LLP)

FINANCE LEASE
[See Capital Lease; compare Operating Lease]

Typically, a finance lease is a full-payout, noncancellable agreement, in which the lessee is responsible for maintenance, taxes, and insurance. (U.S. Equipment Leasing Association)

FIXED PURCHASE OPTION
[see also Bargain Purchase Option, Bargain Renewal Option, Fair Market Purchase Option, and Purchase Option]

An option given to the lessee to purchase the leased property form the lessor on the option date for a guaranteed price, determined at the inception at the lease. (Blakes Cassels & Graydon LLP)

FULL PAYOUT LEASE

A lease in which the total of the lease payments pays back to the lessor the entire cost of the leased property including financing, overhead and a reasonable rate of return, with little or no dependence on a residual value. (Blakes Cassels & Graydon LLP)

Lease which provides for recovery of the full cost of an asset to the lessor over the lease term plus a return to the lessor, by way of rent plus guaranteed residual. (Leasing in Canada [Third Edition], Ralph Selby, FCA, Butterworths, 1999)

A lease in which the lessor recovers, though the lease payments, all costs incurred in the lease plus an acceptable rate of return, without any reliance upon the leased asset’s future residual value. (U.S. Equipment Leasing Association)

GAAP

See Generally Accepted Accounting Principles

GOODS & SERVICES TAX (GST)

A national value-added tax imposed on taxable supply of goods and services provided in Canada. Supply is defined to include sale, transfer, barter, exchange, licence, rental, lease,gift or disposition. (PricewaterhouseCoopers LLP)

GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)

Accounting practices which have been codified in the (Canadian Institute of Chartered Accountants) CICA Handbook, or which are in common usage. (Leasing in Canada [Third Edition], Ralph Selby, FCA, Butterworths, 1999)

HELL-OR-HIGH-WATER CLAUSE

These contractual provisions essentially require that the lessee perform its obligations under the lease without right of setoff, deduction, abatement, compensation or counter-claim for any reason whatsoever. For the lessor, the purpose is to ensure that it will invariably receive its monthly rental payment. Gowling Lafleur Henderson LLP, Montréal.
[See also: “Hell or High Water” Clauses in Equipment Leases ~ their enforceability in Québec”, by David B. Kierans, Partner, Business Law Group, Gowling Lafleur Henderson LLP, Montréal, March 2001, at: www.cfla-acfl.ca/cfla-hellhighwater.pdf.]

A clause in a lease that reiterates the unconditional obligation of the lessee to pay rent for the entire term of the lease, regardless of any event affecting the asset or any change in the circumstances or the lessee. (U.S. Equipment Leasing Association)

IMPLICIT INTEREST RATE

See Interest Rate Implicit in the Lease

INDENTURE OF TRUST

An agreement between the owner trustee and the indenture trustee: The owner trustee mortgages the equipment and assigns the lease and rental payments under the lease as security for amounts due to the lenders. Same as security agreement or mortgage. (U.S. Equipment Leasing Association)

INSURANCE

Insurance means the undertaking by one person to indemnify another person against loss or liability for loss in respect of a certain risk or peril to which the object of the insurance is exposed, or to pay a sum of money or other thing of value upon the happening of a certain event. (Ontario Insurance Act)

A contractual agreement between an insurance company and an insured where the company promises to pay for losses from property damage or bodily injury caused by a covered peril. The insured promises to pay to the insurance company in return for coverage. You can only insure against future accidental events. The main principle of insurance is that the insured is indemnified by the insurance company after a loss. This means that the insured is paid no more and no less than the amount of the loss. The insurance policy is the written evidence of the contract and thus contains the terms and conditions of the contract. (Hunter Keilty Muntz & Beatty)

INSURANCE PREMIUMS

Premium means the single or periodical payment under a contract of insurance and includes dues, assessments, administration fees paid for the administration or servicing of such contract, and other considerations. (Ontario Insurance Act)

Premiums are determined by applying the law of averages and the theory of probability to past experience. (Hunter Keilty Muntz & Beatty)

INSURANCE RISK

Risk means a chance of loss.

Speculative Risk - exists when there is a chance of loss and also a chance for profit i.e. gambling at a casino - these risks cannot be insured against.

Pure Risk - exists when there is a chance of loss but no chance of profit i.e..: driving an asset - these risks can be insured against.

Broadly, there are three choices:

(1) Eliminate the risk: implement preventive measures to reduce risk i.e..: fire alarms, sprinklers, seat belts.

(2) Assume the risk: bear the cost of losses as they occur or set aside an amount of money periodically in order to self insure against losses.

(3) Transfer the risk: transfer the risk to someone whose financial capability to handle a loss is greater than your own. This risk transfer comes at a price and is called insurance. (Hunter Keilty Muntz & Beatty)

INITIAL DIRECT COSTS

The costs incurred by a lessor directly associated with negotiating and executing a specific leasing transaction (i.e., commissions, legal, documentation). (KPMG LLP)

INTEREST RATE IMPLICIT IN THE LEASE

The discount rate that, at the inception of the lease, causes the aggregate present value of (a) the lessor’s minimum lease payments excluding executory costs; and (b) the unguaranteed value accruing to the benefit of the lessor to be equal to the fair value of the property at the inception of the lease. (KPMG LLP)

INTERNAL RATE OF RETURN

The rate of return on an investment, calculated by finding the discount rate which equals the present value of future cash flows to the initial cost of the investment. (Leasing in Canada [Third Edition], Ralph Selby, FCA, Butterworths, 1999)

INSTALLMENT SALE
[See Conditional Sale]

An installment sale occurs when a vendor transfers ownership and possession to the purchaser immediately. The purchaser agrees to make payments over a period of time. An installment sale is not a lease. (PricewaterhouseCoopers LLP)

LCT

See Large Corporation Tax

LARGE CORPORATION TAX

Large Corporation Tax, a federal tax imposed on corporations with capital over $10 million. (Leasing in Canada [Third Edition], Ralph Selby, FCA, Butterworths, 1999)

LEASE

A contract in which one party conveys the use of an asset to another party for a specific period of time at a predetermined rate. (U.S. Equipment Leasing Association)

LEASE TERM

The lease term is the fixed non-cancellable term of the lease plus:

  • all periods covered by bargain renewal options;
  • all periods for which failure to renew would impose on the lessee a penalty sufficiently large that renewal appears reasonably assured;
  • all periods covered by ordinary renewal options where the lessee has undertaken to guarantee the lessor’s debt related to the leased property;
  • all periods covered by ordinary renewal options preceding the date on which a bargain purchase option is exercisable; and
  • all periods representing renewals or extensions of the lease at the lessor’s option. (KPMG LLP)
LEASE RATE
(Rental Payment)

The periodic rental payment to a lessor for the use of assets. Or the lease rate as the implicit interest rate in minimum lease payments. (U.S. Equipment Leasing Association)

LESSEE

The party who is obligated to pay rental to the lessor in exchange for use and possession of the leased property. (Blake Cassels & Graydon LLP)

The party who obtains the use of an asset through a lease agreement. (Leasing in Canada [Third Edition], Ralph Selby, FCA, Butterworths, 1999)

The user of the equipment being leased. (U.S. Equipment Leasing Association)

LESSEE’S INCREMENTAL BORROWING RATE

The interest rate that, at the inception of the lease, the lessee would have incurred to borrow (using similar terms) to purchase the leased asset. (KPMG LLP)

LESSOR

The party who has legal title to the leased property and grants the lessee the right to use and possess the leased property in exchange for a rental amount. (Blake Cassels & Graydon LLP)

The party who owns the leased asset.(Leasing in Canada [Third Edition], Ralph Selby, FCA, Butterworths, 1999)

LEVERAGED LEASE

In this type of lease, the lessor provides an equity portion (usually 20 to 40 percent) of the equipment cost and lenders provide the balance on a nonrecourse debt basis. The lessor receives the tax benefits of ownership. (U.S. Equipment Leasing Association)

MASTER LEASE

A contract where the lessee leases currently needed assets and is able to acquire other assets under the same basic terms and conditions without negotiating a new contract. (U.S. Equipment Leasing Association)

MIDDLE MARKET (or Mid-Ticket)

A market segment generally represented by financings over $100,000 but under $1 million. (Over US$100,000 but under US$2 million in the United States - U.S. Equipment Leasing Association)

MINIMUM LEASE PAYMENTS

Lessee:
The minimum rental payments called for by the lease over the lease term; plus

  • any guarantee by the lessee of the residual value of the leased property at the end of the lease term; and
  • any penalty required to be paid by the lessee for failure to renew or extend the lease at the end of the lease term.

If a bargain purchase option exists, then only the minimum rental payments and the bargain purchase option are included in the lease payments.

Lessor:
The minimum lease payments for the lessee as described above and any residual value or rental payments beyond the lease term guaranteed by a third party unrelated to the lessee or lessor.
(KPMG LLP)

NET LEASE

A lease wherein payments to the lessor do not include insurance and maintenance, which are paid separately by the lessee. (U.S. Equipment Leasing Association)

NET PRESENT VALUE

The sum of a series of future cash flows, discounted at an appropriate rate to a current value. (Leasing in Canada [Third Edition], Ralph Selby, FCA, Butterworths, 1999)

NONRECOURSE LOAN

In a leveraged lease, the lenders cannot look at the lessor for repayment. The lender’s only recourse is to the lessee and, therefore, the lessee’s credit rating is of prime importance. (U.S. Equipment Leasing Association)

OPEN-END LEASE
[Compare Closed-end Lease]

Used generally in vehicle leasing, in an Open-End Lease, a lessee makes a set number of payments during the term of the lease and returns the vehicle to the lessor at the end of the lease term. Then an adjustment is made. The lessee is required to make an additional payment covering the difference between the actual value of the vehicle at the end of the lease and the residual value stated on the lease contract. If, however, the actual value of the vehicle is more than the residual value stated in the lease, the lessee is entitled to the difference. [See also Residual Value]. (Turning the Lights on Leasing - Consumer Guide to Vehicle Leasing)

A lease where at the end of the lease term, the lessee is required to make an adjustment payment covering the difference between the actual value of the leased property at the end of the lease and the residual value stated on the lease contract. If the actual value of the leased property is greater than the residual value stated on the lease, then the lessee is entitled to the difference. (Blake Cassels & Graydon LLP)

A lease where a lessee guarantees that the lessor will realize a minimum value from the sale of the asset at the end of the lease. (U.S. Equipment Leasing Association)

OPERATING LEASE
[Compare to Capital or Finance Lease]

A lease which does not transfer substantially all the benefits and risks incident to ownership of property. (KPMG LLP)

Any lease that is not a capital lease. These are generally used for short term leases of equipment. The lessee can acquire the use of equipment for just a fraction of the useful life of the asset. Additional services such as maintenance and insurance may be provided by the lessor. (U.S. Equipment Leasing Association)

PACKAGER

The leasing company, investment banker, or broker who arranges a leveraged lease. (U.S. Equipment Leasing Association)

PRESCRIBED PROPERTY

Refers to exempt property and assets with a fair market value of $25,000 or less per lease. It is used for the purposes of the federal Income Tax Act Section 16.1 lessor/lessee election introduced in April 1989. (Leasing in Canada [Third Edition], Ralph Selby, FCA, Butterworths, 1999)

PRESCRIBED RATE

This is the interest rate applicable to determine the portion of lease payments that are treated as notional repayments of principal under the April 1989 income tax revisions. The rate is set monthly and is one point greater than the long-term Government of Canada bond rate of the month before the immediately preceding month. (Leasing in Canada [Third Edition], Ralph Selby, FCA, Butterworths, 1999)

PRESENT VALUE

The current equivalent of payments or a stream of payments to be received at various time in the future. The present value will vary with discount interest factor applied to future payments. (U.S. Equipment Leasing Association)

PURCHASE OPTION
[See also Bargain Purchase Option, Fair Market Purchase Option, Fixed Purchase Option]

A provision by which a lessee has the right to purchase the equipment at the end of the lease. The purchase option may be stated at a specified amount or at fair market value. (U.S. Equipment Leasing Association)

PUT OPTION

The requirement to purchase an asset at a particular time and at a predetermined price. In a lease transaction, this is a lessor’s right to require the lessee (or some third party) to purchase the asset at the end of the lease term. (U.S. Equipment Leasing Association)

RENTAL PAYMENT

See Lease Payment

RESIDUAL VALUE

The estimated fair value of the leased property at the end of the lease term. (KPMG LLP)

The value of leased property at the end of the lease term. (Leasing in Canada [Third Edition], Ralph Selby, FCA, Butterworths, 1999)

The residual value is, unless otherwise stated on the lease, the estimated wholesale value of the leased vehicle at the end of the lease. (Turning the Lights on Leasing - Consumer Guide to Vehicle Leasing)

The value of an asset at the conclusion of a lease. (U.S. Equipment Leasing Association)

SALE LEASEBACK

The sale of a property with the purchaser leasing the property back to the seller. (KPMG LLP)

The sale property where the purchaser leases it back to the seller. (Leasing in Canada [Third Edition], Ralph Selby, FCA, Butterworths, 1999)

An arrangement whereby equipment is purchased by a lessor from the company owning and using it. The lessor then becomes the owner and leases it back to the original owner, who continues to use the equipment. (U.S. Equipment Leasing Association)

A lessee sells property owned by it to the lessor and simultaneously leases the same property back from the lessor. The usual objectives are: (a) to free cash in the amount of the purchase price for other uses by the lessee; (b) for benefits not otherwise available, such as a deduction for rental payments instead of depreciation. (Blake, Cassels & Graydon LLP)

SALES-TYPE LEASE

A capital lease which at the inception of the lease, the fair value of the leased property is greater or less than its carrying amount resulting in a profit or loss. (KPMG LLP)

Lease normally arising when a manufacturer or dealer uses leasing to effect a sale of its products; such lease transactions give rise to two types of income: the initial profit or loss on the sale of the product at the inception of the lease, and finance income over the lease term. (Leasing in Canada [Third Edition], Ralph Selby, FCA, Butterworths, 1999)

A lease by a lessor who is the manufacturer or dealer, in which the lease meets the definitional criteria of a capital lease or direct financing lease. (U.S. Equipment Leasing Association)

SKIP PAYMENTS

Payments which are not required to be made during a specified interval (e.g., the first payment may be due in 90 days, which would be a “three-month skip”. (Leasing in Canada [Third Edition], Ralph Selby, FCA, Butterworths, 1999)

SMALL-TICKET LEASING

Typically, financing transactions under $100,000. (Under US$100,000 in the United States - U.S. Equipment Leasing Association)

SPECIFIED LEASING PROPERTY

Essentially, depreciable property leased by a lessor to a lessee for a term of more than one year. Leasing having a fair value of $25,000 or less per lease are excluded and it does not include intangible property, including systems’ software, certified feature films or certified productions. (Leasing in Canada [Third Edition], Ralph Selby, FCA, Butterworths, 1999)

STRETCH LEASE

An agreement whereby the lessee has the option, at the end of the primary lease term, to either extend the term of the lease or purchase the asset; should lessees choose to extend the term, they have no purchase option later; the present value of the extended rent usually equals the value of the option price. (Leasing in Canada [Third Edition], Ralph Selby, FCA, Butterworths, 1999)

SYNTHETIC LEASE

One of a variety of agreements designed to simulate a lease. (Leasing in Canada [Third Edition], Ralph Selby, FCA, Butterworths, 1999)
[See also: “Synthetic Leases in Canada” by Jeffrey Taylor at http://executivecaliber.ws/sys-tmpl/syntheticleasesincanada]

TRUSTEE

A bank or trust company that holds title to or a security interest in leased property for the benefit of the lessee, lessor, and/or creditors of the lessor. A leveraged lease often has two trustees: an owner trustee and an indenture trustee. (U.S. Equipment Leasing Association)

UNGUARANTEED RESIDUAL VALUE

That portion of the residual value of leased property which is not guaranteed (or is guaranteed by a party related to the lessor). (KPMG LLP)

UPGRADING

The replacement of an asset with a similar but more serviceable asset, generally in an attempt to forestall or correct obsolescence. (Leasing in Canada [Third Edition], Ralph Selby, FCA, Butterworths, 1999)

VENDOR LEASING

The working relationship between a financing source and a vendor to provide financing to stimulate the vendor’s sales. The financing source offers leases or conditional sales contracts to the vendor’s customers. The vendor leasing firm substitutes as the captive finance company of a manufacturers or distributor through the extension of leasing to customers, provisions for credit checking, and performance of collections and operational administration. Also known as lease asset servicing or vendor programs. (U.S. Equipment Leasing Association)

WEAR AND TEAR

Every vehicle will experience normal wear and tear from every day use. Excess wear and tear is over and above expected normal wear and tear. The lease may describe what excess wear and tear means. Examples of excess wear and tear include: bald or mis-matched tires, body damage, missing parts or interior rips and tears. (Turning the Lights on Leasing - Consumer Guide to Vehicle Leasing)

Last Updated: September 2001

PPSA Leasing Glossary

The Personal Property Security Act (PPSA) is a provincial statute which provides a public registration system permitting the owners of equipment and vehicles or creditors with rights over equipment and vehicles to register their interest in such assets. There is a PPSA in Alberta, B.C., Manitoba, Ontario and Saskatchewan.

The following terms are either derived from definitions contained in the statutes or from general usage in relation to the PPSA...

A general glossary of leasing terms can be found in a separate Leasing Glossary.

PLEASE NOTE: This document has been designed and compiled as a practical resource to assist those active in the asset-based financing, equipment and vehicle leasing industry in Canada. It does not purport to provide a comprehensive or definitive version of terms and language commonly used in the industry.

The CFLA welcomes the suggestion of additional terms or definitions of common use in the business of asset-based financing, equipment and vehicle leasing in Canada.

The terms included in this CFLA PPSA Leasing Glossary were drawn from the documentation presented at the following CFLA Professional Development Seminars:

  • Legal Principles for Leasing • Blake, Cassels & Graydon LLP
  • PPSA • Understanding Lease Registration • Jones McCloy Peterson
  • PPSA • Understanding Lease Registration • Lafleur Brown/Gowling Lafleur Henderson LLP
ACCESSIONS

Goods that are installed in or affixed to other goods. (Blake, Cassels & Graydon LLP)

ATTACHMENT

A PPSA concept which means that (a) value has been given; (b) the lessee has rights in the collateral; and (c) except for the purpose of enforcing rights between the parties to the lease, the security interest becomes enforceable under the PPSA, unless the parties have specifically agreed to postpone the time for attachment in which case the security interest will attach at the time specified in the agreement. The PPSA basically requires that the lessee have signed a security agreement (lease) that contains a proper description of the collateral (the leased property), or the collateral be in the possession of the lessor. (Blake, Cassels & Graydon LLP)

This is the creation of the security interest which happens when value is given the debtor has rights to the collateral and the security interest is enforceable. It can include after-acquired property and future advances. (Jones McCloy Peterson)

COLLATERAL

Personal property that is subject to a security interest. As far as lessors are concerned, this will in all likelihood be simply the leased property. (Blake, Cassels & Graydon LLP)

CONSUMER GOODS

Goods that are used or acquired for use primarily for personal, family or household purposes.(Blake, Cassels & Graydon LLP)

DEBTOR

A person who owes payment or other performance of the obligation secured (including a lessee). (Lafleur Brown)

Among other things, a debtor may be a lessee under a lease for a term of more than one year; or (b) a person who owes payment or performance of an obligation secured, whether or not that person owns or has rights in the collateral. (Blake, Cassels & Graydon LLP)

DEEMED SECURITY INTEREST

Any interest to which the PPSA is deemed to apply notwithstanding the fact that such interest does not secure payment or performance of an obligation, and includes, most importantly as far as lessors are concerned, a lease for a term of more than one year. (Blake, Cassels & Graydon LLP)

EQUIPMENT

Goods that are held by a debtor other than as inventory or consumer goods. (Blake, Cassels & Graydon LLP)

FINANCING CHANGE STATEMENT

A financing change statement is used to amend the information the financing statement. (See also Financing Statement and Verification Statement). (Blake, Cassels & Graydon LLP)

FINANCING LEASE

See Security Lease.

FINANCING STATEMENT

A financing statement is used to register a security interest/lease in the Personal Property Registry under the PPSA in order to perfect that security interest. (See also Financing Change Statement and Verification Statement). (Blake, Cassels & Graydon LLP)

GOODS

Tangible personal property, fixtures, crops and the unborn young of animals, but does not include chattel paper, a documentation of title, an instrument, a security, money trees other than until the trees are severed, or minerals or hydrocarbons until they are extracted. (Blake, Cassels & Graydon LLP)

INVENTORY

Goods that are:

  1. held by a person for sale or lease, or that have been leased by that person as lessor;
  2. to be furnished by a person or have been furnished by that person under a contract of service;
  3. raw materials or work in progress; or
  4. material used or consumed in a business. (Blake, Cassels & Graydon LLP)

Goods held for sale or lease. (Jones McCloy Peterson)

LEASE FOR A TERM OF MORE THAN ONE YEAR

Includes:

  • a lease for an indefinite term including a lease that is determinable by one or both of the parties within one year from its execution;
  • a lease initially for a term of one year or less where the lessee, with the consent of the lessor, retains uninterrupted or substantially uninterrupted possession of the leased goods for a period in excess of one year until the lessee's possession extends for more than one year); and
  • a lease for a term of one year or less where:
  • the lease provides that it is renewable for one or more terms automatically, at the option of one of the parties or by agreement of all the parties; and
  • the total terms, including the original term, may exceed one year,

but does not include:

  • a lease involving a lessor who is not regularly engaged in the business of leasing goods;
  • a lease of household furnishing or appliances as part of a lease of land where the goods are incidental to the use and enjoyment of the land; or
  • a lease of prescribed kind of goods regardless of the length of the term of the lease. There are presently no such prescribed goods.

(Blake, Cassels & Graydon LLP)

MOTOR VEHICLE

Any mobile device that is propelled primarily by any power other than muscle power in, on or by which a person may be transported and that is designed for use on a road or natural terrain. (Blake, Cassels & Graydon LLP)

PERFECTION

A PPSA concept created, generally as far as lessors are concerned, when a lessee signs a written lease, value is given, the lessee has rights in the lese property and the “perfects” its interest most likely by registration of a financing statement. More formally, perfection means that the security interest has attached and all steps required for perfection under the PPSA have been completed. (Blake, Cassels & Graydon LLP)

This is the doing of all the things necessary to put the security interest somewhere into the priorities sequence. Perfection is achieved by registration of a financing statement in the Personal Property Registry or by possession by the secured party. ( Jones McCloy Peterson)

PERSONAL PROPERTY

Chattel paper, documents of title, goods, instruments, intangibles, money and securities and includes fixtures but does not include building materials that have been affixed to real property. (Lafleur Brown)

PMSI
(pronounced “Pimm-zee”)

See Purchase Money Security Interest.

PPSA

The Personal Property Security Act, a provincial statute which provides a public registration system permitting the owners of equipment and vehicles or creditors with rights over equipment and vehicles to register their interest in such asset. There is a PPSA in Alberta, B.C., Manitoba, Ontario and Saskatchewan.(Blake, Cassels & Graydon LLP)

PROCEEDS

Indentifiable or traceable personal property arising from any dealing with collateral. (Jones McCloy Peterson)

PURCHASE MONEY SECURITY INTEREST
(or PMSI)

Includes most importantly, as far as lessors are concerned, the interest of a lessor of goods under a lease for a term of more than one year. It also includes:

  • a security interest taken in collateral to the extent that it secures payment of all or part of its purchase price;
  • a security interest taken in collateral by a person who gives value for the purpose of enabling the debtor to acquire rights in the collateral, to the extent that the value is applied to acquire the rights; and
  • the interest of a person who deliver goods to another person under a commercial consignment,

but does not include a transaction of sale by and lease back to the seller and, for the purposes of this definition, “purchase price” and “value” include credit charges of interest payable for the purchase or loan credit. (Blake, Cassels & Graydon LLP)

SECURED PARTY

Includes lessors under a lease for a term of more than one year and lessors under a financing lease, but more formally means:

  • a person who has a security interest;
  • a person who holds a security interest for the benefit of another person;
  • the trustee, if a security interests is embodied in a trust indenture.

(Blake, Cassels & Graydon LLP)

SECURITY AGREEMENT

Any agreement creating a security interest; includes all the old forms or security agreements plus leases for a term of more than one year and commercial consignments; substance test important so that if it looks like a security interest, it probably is . (Jones McCloy Peterson)

SECURITY INTEREST

Includes the interest of a lessor under a lease for a term of more than one year and under a financing lease, but more formally means:

  • an interest in goods, chattel paper, a security, a document of title, an instrument, money or an intangible that secures payment or performance of an obligation, but does not include the interest of a seller who has shipped goods to a buyer under a negotiable bill fo lading or its equivalent to the order of the seller or the order of an agent of the seller, unless the parties have otherwise evidenced an intention to create or provide for a security interest in the goods; and
  • the interest of:
    (i) a transferee arising from the transfer of an account or a transfer of chattel paper;
    (ii) a person who delivers goods to another person under a commercial consignment; and
    (iii) a lessor under a lese for a term of more than one year,
    whether or not the interest secures payment or performance of an obligation.

(Blake, Cassels & Graydon LLP)

An interest in personal property that secures payment or performance of an obligation, and includes, whether or not the interest secures payment or performance of an obligation, the interest of a transferee of an account or chattel paper. (Lafleur Brown)

SECURITY LEASE
[Compare to True Lease]

Colloquially means a lease which secures payment or performance of an obligation. Also referred to as “financing lease” or “disguised sale” or “disguise loan”. In essence, involves a situation where a sale of goods is structured as a lease to avoid certain legal consequences, including the requirement to register a PPSA financing statement in some jurisdictions (although not British Columbia). (Blake, Cassels & Graydon LLP)

SERIAL NUMBERED GOODS

A motor vehicle, manufactured home, boat, outboard motor, trailer and aircraft. (Blake, Cassels & Graydon LLP)

TRUE LEASE
[Compare to Security Lease]

Colloquially means a lease which does not secure payment or performance of an obligation, and essentially involves a situation where a lessee is not acquiring leased property through the means of a lease. (Blake, Cassels & Graydon LLP)

VERIFICATION STATEMENT

A verification statement is the confirmation delivered by the Personal Property Registry of the registration of a financing statement or a financing change statement. (See also Financing Statement and Financing Change Statement) (Blake, Cassels & Graydon LLP)

Last Updated: September 2001

Brief Description of Asset-based Financing and Leasing1

What is a lease ?

There are many definitions and interpretations of a lease. Accounting, tax, legal and financial advisers all have different perspectives on leasing, as do government regulators and the users of leased vehicles and equipment. In the end, however, it all comes down to a very simple concept.

For the sake of simplicity, in this Brief Description of Asset-based Financing and Leasing, the word “equipment” includes vehicles.

A lease contract is an agreement under which the owner of the equipment conveys to the user the right to use the equipment in return for a number of specified payments over an agreed period of time.

The owner of the equipment is referred to as the “lessor”. The user of the equipment is known as the “lessee”.

Very generally speaking, there are two kinds of leases. A capital lease is usually used to finance equipment for the major part of its useful life and there is a reasonable assurance that the lessee will obtain ownership of the equipment by the end of the lease term. An operating lease usually finances equipment for less than its useful life and at the end of the lease term, the lessee can return the equipment to the lessor without further obligation.

A lessor can be an individual or a corporation. In most cases, lessors are corporations specializing in financial services. They can be privately-owned companies, publicly-traded companies, divisions or subsidiaries of domestic or foreign banks, trust companies, insurance companies, manufacturing companies or automobile dealers.

Equipment commonly leased

Just about anything can be leased. It is simply a way of acquiring equipment, an alternative to paying cash, taking a loan, issuing debentures and other forms of financing and it is not peculiar to any specific type of equipment.

Today, businesses lease a wide variety of equipment for use in their manufacturing, marketing and administration. The following is not a comprehensive list of equipment leased by Canadian businesses, rather it is intended to illustrate the wide variety of equipment commonly leased.

  • Agricultural equipment
  • Passenger cars
  • Trucks, trailers & recreational vehicles
  • Construction equipment
  • Hotel & restaurant equipment
  • Materials handling
  • Mining & petroleum equipment
  • Railway rolling stock
  • Store furniture, fixtures & equipment
  • Aircraft
  • Buses
  • Computers (hardware, software)
  • Forestry equipment
  • Manufacturing & processing equipment
  • Medical-health services equipment
  • Office furniture, fixtures & equipment
  • Ships & water vessels
  • Telecommunications & broadcasting equipment

Why do businesses lease ?

There is seldom a single answer to this question. It depends very much on the situation of the lessee, the user of the equipment. One thing can be said with certainty. There is a far greater awareness today that most businesses make money by using equipment, not by owning it.

Equipment does not normally increase in value over time. It usually loses value. Even companies with ample cash resources must carefully evaluate every available financing alternative when acquiring new equipment. Cash tied up in fixed assets are no longer available to finance inventory and the profit producing activities of production, distribution and marketing. For this reason, many businesses seek to lease much of their equipment. They realize that owning a depreciating asset is not always the logical answer.

The practice of leasing is not confined to the business world. Universities, hospitals, government bodies, school boards and municipalities frequently lease the equipment they need to fulfil their respective missions. Cutbacks in public funding and increasing restraints on capital budgets present obvious difficulties in the acquisition of essential equipment. From computer hardware and software for administrative and educational uses to school buses, garbage trucks, police cars and sophisticated medical equipment, these are the kinds of essential equipment leased by public sector bodies. The federal and provincial governments too are major lessees of a wide range of equipment.

1 Source: Adapted from Canada Leasing Review published by Asset Finance & Leasing Digest (a Euromoney publication) in association with CFLA, April 1995

Turning the Lights on Leasing: Consumer Guide to Vehicle Leasing

Brought to you by:
Canadian Vehicle Manufacturers Association
Canadian Automobile Dealers Association
Association of International Automobile Manufacturers of Canada
Canadian Finance and Leasing Association

Our Goal:

Leasing has become a very popular way for Canadians to obtain their vehicles. Even so, many people still find the topic to be a bit of a mystery. The goal of this booklet is to remove the mystery and help you decide whether or not leasing is right for you.

Turning the Lights on Leasing

What you should know before you get started

Table of Contents:
What Is Leasing
Is Leasing For Me?
Things You Need To Know
If You Lease
Things You May Want To Consider For Your Lease
Key Terms
Disclosure Checklist

The language of leasing

Leasing has its own language, so we have provided a list of key terms at the back to assist you. These key terms appear in italics throughout the pamphlet and will be found on any lease contract you look at.

What is leasing?

Leasing is a way of obtaining a vehicle for a set period of time.

Is leasing for me?

The advantages of leasing are:
  • A lower monthly payment than you would pay on a loan for the same vehicle
  • You pay tax only on the monthly payment rather than up front on the full price of the vehicle the opportunity to drive a new vehicle more often
  • The comfort of knowing you vehicle is under warranty for the full duration in the case of the short term (2-3 years) lease
  • You have options at lease end (return the vehicle, buy the vehicle if you lease has a purchase option, or let the leasing company sell it.)
  • You avoid tying up your money in a vehicle.
The disadvantages of leasing are:
  • The carrying cost is high if you keep your vehicle on lease for a long period of time
  • The lease can be costly if the lease is not based on the number of kilometers you realistically expect to drive
  • You don't own the vehicle and do not build up “equity” with a lease as you do when you purchase a vehicle

Leasing is not for everyone. The least expensive way to obtain a vehicle is always to pay cash. If you cannot pay cash then the shortest borrowing term available to you will result in the lowest interest cost or “carrying cost”. The faster you repay what you have borrowed, the lower your carrying costs. Carrying costs for a lease are higher than with a loan of the same term because you are only paying off the depreciation, and not repaying the entire value of the vehicle.

Things you need to know:

Whether you lease or buy . . . you need to insure your vehicle.

In addition to insuring the vehicle, you must make sure that you have the amount of coverage required by your lease. This may be more than if you buy your vehicle.

Whether you lease or buy . . . you are responsible for licensing and registering your vehicle.

You are responsible for paying the license and vehicle registration fees during the term of the lease, just as if you bought the vehicle.

Whether you lease or buy . . . you are responsible for maintaining your vehicle.

Unless you have a lease that is a “full maintenance” lease, you are responsible for maintaining the vehicle according to the maintenance schedule set out in you Owner's Manual.

If you lease . . . you are responsible for repairing the vehicle.

You will need to repair the vehicle as necessary. If you do not properly repair the vehicle, you may be charged Excess Wear and Tear.

Whether you lease or buy . . . you are protected.

There is a Canadian Motor Vehicle Arbitration Plan (CAMVAP)

CAMVAP is a free arbitration program available to you from participating manufacturers and leasing companies. If you qualify for arbitration under CAMVAP, the program will help you deal with any disputes between you and the manufacturer that might arise concerning manufacturing defects in you vehicle. Usually, the leasing company will work with the manufacturer to resolve your concerns. (This program is not currently available in Quebec.)

If you lease

You should know:

1. There are different kinds of leases

Closed-End Leases:
In a Closed-End Lease, you make a set number of lease payments during the term of your lease and return the vehicle to the leasing company at the end of the lease term. You are not required to make any additional payments unless there is physical damage to the vehicle, such as Excess Wear and Tear, or the number of kilometres you have driven is higher than the kilometre limit set out in the lease. At the end of the lease, your options are:

  • Return the vehicle
  • Buy the vehicle (if there is a purchase option)
  • Lease a new vehicle

Most manufacturer's leases are the close-end type.

Open-End Leases:
In an Open-End Lease, you make a set number of lease payments during the term of your lease and return the vehicle to the leasing company at the end of the lease term. Then an adjustment will be made. You will be required to make an additional payment covering the difference between the actual value of the vehicle at the end of the lease and the Residual Value stated on your lease contract. However, if the value of the vehicle is more than the residual value stated on your lease, then you are entitled to the difference.

For example, if the residual value in your lease is $8,000,00, and the leasing company can only sell the vehicle for $7,500.00, you will have to pay $500.00. If the vehicle is sold for $8,500.00, the leasing company will pay you $500.00.

2. There are payments required at the start of the lease

Refundable Security Deposit:
Most leases require you to pay a security deposit. The Security deposit will be refunded at the end of your lease, unless it is used to pay for any remaining amounts that you owe.

First Lease Payment:
You may be required to pay the first lease payment.

Leased Vehicle Amount Reduction (Down Payment):
You can lower your monthly payment by trading in a vehicle or paying an amount in cash. This is similar to a down payment on a loan. On some leases, a significant down payment may be required.

License and Registration Fees:
You may be required to pay vehicle license and registration fees at the time the vehicle is delivered to you.

3. There may be an Acquisition Fee

If your lease contains an Acquisition Fee it increases the carrying costs of the lease and must be included in the Total Lease Charges.

4. Your lease may contain GAP Protection

If the vehicle is in an accident and is damaged beyond repair, GAP protection will cover the difference (the gap), after you pay the deductible, between what you owe on the remainder of your lease and the amount of your insurance settlement. Many leases may include GAP protection but traditional vehicle loans usually do not.

5. You may not be allowed to remove the vehicle form the province or territory in which you leased it, without the prior permission of the leasing company.

Most leases state that you must obtain permission from the leasing company to take the vehicle out of your province or territory if you will be out of your province or territory for an extended period of time.

6. Your lease can be tailored to suit your driving needs.

With Closed-End Leases:
You can negotiate the number of kilometres that you will need at the time you enter into your lease agreement. If you require additional kilometres it will increase your monthly payment. If you drive more kilometres than you have agreed to, you will be required to pay an Excess Kilometer Charge. You can usually “purchase” additional kilometres at the time you sign your lease at a lower cost than at the end of your lease term.

With Open-End Leases:
Open-end Leases normally have no kilometre restriction, however, the number of kilometres you drive will lower the market value of the vehicle at the end of the lease, increasing your costs at lease end.

Things you may want to consider before you lease

1. Purchase Options.

You may choose to buy the vehicle if your lease contains a purchase option. Some leases give you the option to purchase the vehicle at any time, while other leases give you the option to purchase the vehicle only at the end of the lease.

If your lease has an option to purchase the vehicle, the purchase option price must be clearly stated.

2. Right to Early Termination.

You will not be allowed to end your lease early unless it is stated on you lease. If your lease contains this right, it should also contain the formula for calculating the early termination amount.

Key terms:

Acquisition Fee:
This fee covers the cost of preparing and servicing your lease. If charged, this fee increases the carrying costs and must be included in the Total Lease Charges.

Amount to be Amortized:
This is the difference between the Net Leased Vehicle Amount and the Residual Value and represents the Depreciation that you pay over the term of your lease.

For example:
The Amount to be Amortized is calculated as follows:

Net Leased Vehicle Amount $20,000
minus Residual Value -$12,000
equals Amount to be Amortized $8,000

Annual Percentage Rate:
The Total Lease Charges expressed as an annual rate.

Default:
Default occurs when you fail to comply with any terms of the lease. Your lease will set out specific circumstances which will result in your being in default.

Depreciation:
This is the loss in the vehicle's value that occurs over time. The longer you keep the vehicle, and the more you drive it, the more the vehicle will depreciate. In your lease, the depreciation is referred to as the Amount to be Amortized.

Excess Kilometre Charge:
The cost you face if you drive your vehicle more kilometres than the maximum stated on your lease. This charge is set out as a number of cents for each kilometre over the stated maximum, plus applicable taxes.

Excess Wear and Tear:
Every vehicle will experience normal wear and tear from every day use. Excess wear and tear is over and above expected normal wear and tear. Your lease should describe what excess wear and tear means.

Examples of excess wear and tear include:

  • Bald or Mis-Matched Tires
  • Body Damage
  • Missing Parts or Interior Rips & Tears

Lease Term:
This is the number of months that your lease will be in effect.

Leased Vehicle Amount:
This is the amount you and the leasing company agree on for the vehicle and any other items such as accessories, extra equipment, freight, applicable taxes (such as air conditioning tax) and pre-delivery inspection.

Monthly Provincial and Federal/Harmonized taxes are not included and will be listed separately.

Residual Value:
The Residual Value is, unless otherwise stated, the estimated wholesale Value of you vehicle at the end of your lease.

Total Lease Charges:
The Total Lease Charges are the total carrying costs you pay over the term of the lease. This amount is similar to the cost of borrowing charges on a loan. These charges represent a portion of your monthly lease payment, the other portion is depreciation.

Disclosure Checklist:

Use the checklist below to compare the information offered by different leasing companies to ensure that your contract show all of the applicable information you need to make your leasing decision.

Leasing
Company
Name
Leasing
Company
Name
Leasing
Company
Name
Disclosed
Information
Acquisition Fee
Allowable Kms and Excess Km Charges
Annual Percentage Rate
Gap Protection
Leased Vehicle Amount
Leased Vehicle Amount Reduction
Option to Purchase at Lease End
Residual Value of the Vehicle
Right for Early Purchase
Right for Early Termination (Include charges)
Security Deposit
Term of the Lease
Total Amount Due at Lease Signing
Total Lease Charges
Total Monthly Payment