Equipment Financing Glossary
Plain-English definitions of key terms used in equipment financing and leasing.
Factor Rate
A decimal number (e.g., 0.025) used in leasing to calculate payments. Not the same as APR but correlates with it.
Residual Value
Estimated equipment value at the end of a lease term. Higher residual generally lowers monthly payments.
Section 179
A U.S. tax deduction allowing businesses to expense qualifying equipment in the year of purchase, up to annual limits.
Bonus Depreciation
An additional tax deduction allowing accelerated depreciation of qualifying equipment.
Amortization
The process of paying off a loan over time through regular payments of principal and interest.
APR
Annual Percentage Rate, the yearly cost of borrowing including interest and fees, expressed as a percentage.
ROI
Return on Investment; measures profitability relative to the initial cost.
Lease Term
The length of a lease agreement, typically measured in months (e.g., 36, 48, 60).
Down Payment
Upfront cash paid at purchase; reduces the loan amount and monthly payments.