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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 term. If the equipment is sold for less than the guaranteed value, the lessee must pay the amount of any deficiency to the lessor. The lease is referred to as open-end because the lessee does not know its actual value until the equipment is sold at the end of the lease.
Operating Lease (Also Called Service Lease). A lease that has the characteristics of a usage agreement and also meets certain criteria established by the fasb. Such a lease is not required to be shown on the balance sheet of the lessee.
Purchase Option. A lessee option to purchase the leased asset from the lessor at the end of the lease term for either a fixed amount or at the future fair market value of it.
Put Option. A potential requirement to purchase equipment or other assets at a particular time and at a predetermined price. To exercise this option is at the lessor’s, not the lessee’s, discretion.
Quasi-Lease. A slang term for a non-tax oriented lease, also called a lease-purchase.
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