Here are Some Terms That May Simplify Things for You
Accelerated Payments
A more immediate repayment of a loan balance, which results in lower interest costs.
Alternative Minimum Tax (AMT)
A portion of the tax law giving preferential treatment to certain kinds of income and allowing special deductions and credits for certain expenses. You will need to consult with a tax advisor.
Amortized
To spread something (interest, payments) over a set period of time.
Amount Financed
The amount of credit advanced by the lender after any down payment or trade-in value.
Annual Percentage Rate
This is the “APR” or interest rate. It is the cost of your credit shown as an amortized percentage per year.
Asset
Property owned by a person or a company.
Balloon Financing
A “balloon” is a balance at the end of a set loan term that must be repaid.
Down Payment
The amount of money or trade-in value that is used to reduce the amount to be financed.
Finance Charge
What a loan or lease will cost over the term of a finance agreement.
FMV (Fair Market Value) Leasing
With this type of lease you are not responsible for the leased truck or trailer’s value at the end of the lease term.
Fully Amortized Loan
The loan payment that is the result of equal installments over a fixed period. It includes interest on any outstanding balance.
Level Principal
Payments are automatically adjusted so you always pay the same principal amount.
Lien
A legal claim upon equipment until the debt has been paid.
Lessee
This is the customer in a lease agreement.
Lessor
This is usually the dealer or financial services company.
Municipal Lease
A special lease designed just for the public sector.
Non-Appropriation
A non-appropriation clause in a contract usually indicates that voter approval isn’t necessary.
Off-Balance-Sheet Financing
A means to keep debts off your financial statements.
Principal
The amount of debt left on a loan—this does not include interest.
Rate Buy-Down
When you make an initial “buy-down” payment up front in order to secure a lower interest rate for the loan period.
Released Title
This is the same as a “clear” title. It means there are no liens on the equipment.
Resale Value
The expected value you would receive if you entered into an arms length transaction to sell your equipment at the end of your contracted term.
Residual Value
The estimated value of your equipment at the end of the lease term.
Retail Finance Contract
The most popular way to finance trucks and trailers, both new and used. It is the same basic loan agreement you would use for your house or car.
Skip Payment
This is a means to give you the ability to skip a monthly payment and is especially helpful for people with seasonal businesses.
Tax-Exempt Financing
Certain entities, i.e. governmental bodies, school districts, and certain 501(c)3 corporations, as determined by the Internal Revenue Service , can borrow at preferred interest rates due to the non-taxable nature of the interest component.
Terms And Conditions
This part of a lease contract would be the “return conditions criteria and mileage limitations” that must be met.
Title
The legal owner of any equipment or property is said to have “title.”
Total Sales Price
The total cost of your purchase, including the down payment, the amount financed and all interest fees.
TRAC (Terminal Rental Adjustment Clause) Leasing
With this type of lease you pay a fixed amount equal to what the vehicle is “predetermined” to be worth at the end of the lease.