Note - terms may differ based on your state laws. Verify the definitions in accordance with your state laws for best interpretation.


A third party that buys a lease agreement from a lessor. You become obligated to the assignee, and the assignee generally assumes the responsibilities of the lessor, although some obligations may remain with the lessor. An assignee may be a lessor for purposes of Regulation M when the assignee has substantial involvement in the lease.


The transfer in writing of an interest in a lease, mortgage or other instrument. The assignor, or lessee, transfers the entire remainder of the term created by the lease, and the assignee becomes liable to the original lessor for rent. The assignor may or may not retain secondary liability for performance under the lease, depending upon the terms of the lease pertaining to assignment.


A lessor that sells the lease agreement and transfers the ownership rights to an assignee.

Business lease

A lease in which the lessee has entered into the lease transaction for business and commercial purposes; commercial lease


A lease that does not contain a purchase or renewal option, thereby requiring the lessee to return the equipment to the lessor at the end of the initial lease term.

Consumer lease

A lease of personal property to an individual to be used primarily for personal, family, or household purposes for a period of more than 4 months and with a total contractual obligation of no more than $25,000. A lease meeting all of these criteria is covered by the Consumer Leasing Act and Federal Reserve Board's Regulation M. If any one of these criteria is not met, for example, if the leased property is used primarily for business purposes or if the total contractual obligation exceeds $25,000, the Consumer Leasing Act and Regulation M do not apply. See Total contractual obligation.

Consumer Leasing Act

A 1976 amendment to the Truth in Lending Act that requires disclosure of the cost and terms of consumer leases and also places substantive restrictions on consumer leases. See Consumer lease.


Generally, the time at which you and the lessor sign the lease agreement.


Your failure to meet one or more conditions of your lease agreement. Default may result in early termination of the lease.


The amount by which property loses its value. In leasing, depreciation is the difference between the new car cost and the value of the car at the end of the lease.


Information on the financial and other terms and conditions of a lease, including information required by federal regulation (Regulation M) and by state laws. Required disclosures must be made in writing before the lease is consummated. Advertisements that include key lease terms (the amount of any payment or a statement of payments due before consummation or delivery) must also include certain disclosures. Under Regulation M, certain disclosures must be grouped together and segregated from other information (see Segregated disclosures). Other required disclosures appear elsewhere in the lease documents (see Nonsegregated disclosures).

Early Termination

Occurs when the lessee returns the lease equipment to the lessor or ends a lease prior to end of the lease term as permitted by the original lease contract or subsequent agreement. At times this may result in a penalty to the lessee.

Early termination payoff (early termination balance or gross payoff)

The total amount you owe if your lease is terminated before the scheduled end of the term before subtracting the value credited to you for the vehicle. The payoff is calculated as described in your lease agreement. The early termination payoff may include the unpaid lease balance and other charges.

Equal Credit Opportunity Act

A federal law that prohibits discrimination in credit transactions on the basis of race, color, religion, national origin, sex, marital status, age, source of income, or the exercise of any right under the Consumer Credit Protection Act.

Equipment Schedule

A document that describes in detail the equipment being leased. It may also state the lease term, commencement date, repayment schedule and location of the equipment.

Fair Market Purchase Option

An option to purchase leased property at the end of the lease term at its then fair market value. The lessor does not have the ability to retain title to the equipment if the lessee chooses to exercise the purchase option.

Hell-or-High-Water Clause

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 equipment or any change in the circumstances of the lessee.

Lease Transfer or Assumption

A Lease Transfer or a lease assumption is when a person takes over the payments of a leased item, membership, or service with the approval of the original lease company or lessor from the original lessee and assumes the rights and responsibilities under the current term of the lease agreement.

Late charge

A fee charged for a past-due payment. This charge is usually either a percentage of the lease payment or a fixed dollar amount.

Late payment

A payment received after the specified due date. In most cases, after any grace period, a late payment triggers a late charge.


A transaction in which use and possession but not title to tangible personal property is transferred for a consideration.

Lease Agreement

The contractual agreement between the lessor and the lessee that sets forth all the terms and conditions of the lease.

Lease Assumptions

A Lease Assumption is when another person takes over your lease and assets from you and assumes the rights and responsibilities under the current term of the lease agreement.

Lease Payment

The periodic payment made during the lease term. Such payments are usually of an even amount but it is not uncommon for a lease to have "gaps" in the payment amount, or to be otherwise contoured to fit, for example, the seasonal fluctuations of a lessee's income. Generally, leasing may provide for more creativity in this regard than a loan.

Lease Term

This is the duration of the lease. Your monthly payment may or may not change depending on the length of the lease.

Lease Rate (Rental Payment)

The periodic rental payment to a lessor for the use of assets. Others may define lease rate as the implicit interest rate in minimum lease payments.

Lease Transfer

A Lease Transfer is when another person takes over your lease and assets from you and assumes the rights and responsibilities under the current term of the lease agreement


The party to whom takes on the rights and responsibility of the lease. In a consumer lease, the lessee is you, the consumer. The lessee is required to make payments and to meet other obligations specified in the lease agreement.


The part to a lease agreement who has legal or tax title to the equipment, grants the lessee the right to use the equipment for the lease term, and is entitled to the rentals.

Independent Lessor

A type of leasing company that is independent of any one manufacturer, and, as such, purchases equipment from various unrelated manufacturers or dealers. The equipment is then leased to the end-user or lessee. This type of lessor may also be called a third-party lessor.

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

Net Lease

A lease in which all costs in connection with the use of equipment, such as maintenance, insurance and property taxes, are paid for separately by the lessee and are not included in the lease rental paid to the lessor.

Open-End Lease

A lease in which the lessee guarantees the amount of the future residual value to be realized by the lessor at the end of the lease. If the equipment is sold for less than the guaranteed value, the lessee must pay the amount of any deficiency to the lessor. This lease is referred to as open-end because the lessee does not know its actual cost until the equipment is sold at the end of the lease term.

Option To Purchase

A right to purchase property at a future date: a call.

Purchase Option

An option in the lease agreement that allows the lessee to purchase the leased equipment at the end of the lease term for either a fixed amount or at the future fair market value of the leased equipment.

Put Option

An option in a lease in which the exercise of the option is at the lessor's, not the lessee's, discretion.


The value of the lease property at the end of the lease term as estimated at the time the lease is executed; term value. Although the terms "residual value" or "term value" are sometimes used in reference to the actual value of the property at the conclusion of the term, the term "realized value" is the more commonly used and more appropriate term for the actual value of the property at the conclusion of the lease term.

Residual Value

The value of an asset at the conclusion of a lease.


A transaction that involves the sale of equipment to a leasing company and a subsequent lease of the same equipment back to the original owner, who continues to use the equipment.

Tax Lease

A lease wherein the lessor recognizes the tax incentives provided by the tax laws for investment and ownership of equipment. Generally, the lease rate factor on tax leases is reduced to reflect the lessor's recognition of this tax incentive

True Lease

Another term for tax lease where, for IRS purposes, the lessor qualifies for the tax benefits of ownership and the lessee is allowed to claim the entire amount of the lease rental as a tax deduction.

Third Party Lessor

An independent leasing company, or lessor, that writes leases involving three parties: (1) the unrelated manufacturer or dealer, (2) the independent lessor and (3) the lessee.


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.

Vendor Leasing

A 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 manufacturer or distributor through the extension of leasing to customers, provisions of credit checking, and performance of collections and operational administration. Also known as lease asset servicing or vendor programs.


The physical location, or specifically the court, which will hear a legal dispute between parties.