[See Capital Lease; compare Operating Lease]

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

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)

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

[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)

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)

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

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

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)

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)

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)