What is Leasing?

Leasing is an agreement to rent (vehicles) for a specific period of time and/or mileage. Ownership is not transferred to the person renting unless a purchase option is available and exercised. Back to Top

Who is the Lessee?

The lessee is the person or party signing the contract and taking responsibility for the vehicle and lease payments. Back to Top

Who is the Lessor?

The lessor is the business, manufacturer or the financial institution that owns the vehicle and provides the vehicle and lease. Back to Top

What is an Independent Lessor?

An independent lessor is a lessor that is not affiliated with a vehicle manufacturer. Freedom Leasing is an independent lessor. The benefit of using an independent lessor is having the choice of any make or model to lease, unbiased consulting and the ability to customize a lease for individual needs. Back to Top

What is an Open-End Lease?

All leases are based on a projected end of term value called the "residual value." In an Open-End Lease the lessee has market risk (takes a gain or loss on sale) for the residual value. Consumer leasing law restricts the loss to three monthly payments on consumer leases, but does not restrict potential gains. Back to Top

What is a Closed-End Lease?

All leases are based on a projected end of term value called the " residual value." In a Closed-End Lease the lessee has no risk for the residual value. Closed-End Leases include mileage limitations and reconditioning clauses to protect against excessive use. Back to Top

What is Capitalized Cost?

Capitalized cost is the agreed upon value of the vehicle used to calculate the lease. This amount is usually the cost of the vehicle plus tax. Back to Top

What is a Capitalized Cost Reduction?

A capitalized cost reduction is an amount paid up front by the lessee to reduce the amount used to calculate the lease. This results in a lower payment. Back to Top

What is a Lease Term?

The lease term is the length of time the lease is in force. This is expressed in terms of years or months, usually from 6 to 60. Back to Top

What is Residual Value?

Residual value is the forecast value of the vehicle at the end of the lease term. Residual value is used to calculate the lease payments by establishing the depreciation in the lease. Capitalized cost less residual value equals depreciation. Back to Top

What is Early Termination?

Early termination occurs when a lease is terminated prior to the end of the scheduled term. Early termination usually results in additional charges.
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What is a Purchase Option?

A purchase option in a lease allows the lessee to buy the vehicle at the end of the lease. Back to Top

What is a Subvented Lease?

Subvented leases are leases offered by a vehicle manufacturer that have been reduced by some type of incentive. These incentives (discounts) can be in the form of rate reductions, higher residual values, or shorter terms. The intent is to artificially lower the cost of the lease as an inducement to enter into a lease program with a specific manufacturer and/or model. Generally these are offered for a limited time. Back to Top

What is Excess Wear and Use?

When a lessor calculates a lease, the residual value represents what the lessor expects to be able to sell the vehicle for at lease end. Excess wear and use clauses in a lease protect the lessors anticipated value by insuring that the vehicle is well maintained. Excess wear and use clauses basically require the lessee to return the vehicle in good condition, average wear and tear excepted. Back to Top

What is Reg M?

Regulation M is the federal law that regulates the leasing industry. Reg M provides laws for advertising leases and what disclosures must be made when offering a lease to a consumer. Many states (including Illinois) have their own consumer protection leasing laws. Back to Top

What is a Security Deposit?

Generally equal to one month's payment and required with the first payment.
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What is a Charge for Additional Mileage?

If you exceed the mileage allowance on a Closed-End Contract, you will be charged the rate per mile stipulated in the contract. Back to Top

What is the National Vehicle Leasing Association?

The National Vehicle Leasing Association (NVLA) is a non-profit, member-supported, national trade association representing the vehicle leasing industry. One of NVLA's key objectives is to sponsor and conduct educational activities designed to increase the public awareness of vehicle leasing. Back to Top

What is a CVLE (Certified Vehicle Leasing Executive)?

A two year certification program offered by NVLA in partnership with Northwood University to enhance the professional standards and practices of individuals in the industry. It is the most distinguished educational credential the industry offers.
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What are the tax advantages of leasing?

In some instances you can write off the monthly lease payment as an operating expense, depending on the structure of the lease. In other instances, you can take the equipment as a depreciation expense. Because everyone business handles their tax preparation differently, we encourage you to speak with your accountant regarding the specific benefits for your business or organization. Back to Top

What factors are used to determine credit worthiness of the business?

The length of time in business, references from bank and trades, Dunn & Bradstreet and credit bureau ratings. Back to Top