Section 4： Equipment and Leasing
Equipment acquisition and leasing （as an alternative to purhasing or owning equipment） is very competitive and leasing is a mature business…… Leasing represents an alternative to using cash or bank lines of credit. Experienced lessees or buyers of leased equipment know the importance of securing multiple bids based on a clear and comprehensive RFP. Contractual terms that provide for flexibility and ease of termination for change in operation should be sought. Customized contracts are normally preferred to the vendor's standard agreement.
Agreed Value ： Refers to Schedule “A” value placed on full service lease equipment （motor vehicle trucks） which lessee agrees to by execution of the Schedule “A”。 Represents delivered cost of equipment plus artwork/logo identification， local installation of accessories （on-board computers， cellular telephones， truck body or trailer modifications， safety and spill kits etc.）， “get ready service”， local sales tax if paid by lessor at time of registration， and a margin to cover sales and administrative costs. In the event of early termination lessee may have a buyout obligation and a depreciation credit is deducted from this value based on time in service. Valuation may affect lessee in the event of a casualty loss or theft as the valuation less depreciation credit is what the lessor expects to recover.
Materials Handling Operator Certification： Refers to forklift operator and that employer must certify that training and evaluations are done periodically especially after any accidents or near misses.
CPI： Refers to U.S. Bureau of Labor Statistics publication， which summarizes a series of statistical measurements of inflation or indexes， hence， Consumer Price Index. A review of the publication is necessary to select an index if it is to be used for cost adjustment. The most commonly used index is the one for “All Urban Consumers.” There are also a “Wholesale Index” and several narrowly defined indexes. Commonly used by full service lessors and dedicated contract carriers.
Date-in-Service： Delivery date of equipment pursuant to a non-maintenance lease， full service lease or dedicated transportation agreement.
Depreciation Credit： The dollar amount a vehicle depreciates per month as determined by the lessor under a full service lease contract. It is expressed on the Schedule “A” and is used to calculate a buy out value of the equipment. The number of months in service is multiplied by the credit and deducted from the Schedule “A” Agreed Value. There are usually other fees to be paid in the event of a buy out. See Agreed Value. This practice is usually applicable to all types of equipment.
Finance lease： May be in the form of an operating or capital lease and does not include maintenance or servicing. It may be structured as a FMV purchase option （fair market value） closed end lease or as a TRAC （terminal rental adjustment clause） type lease with a stated residual percentage which the lessee guarantees. A lessee will decide between a TRAC or FMV after weighing tax and rate benefits. In a TRAC lease， the lessee has the option to bid on the equipment at end of term. The lessee is liable for any shortfall （which become the terminal rental adjustment amount） in residual realization in the event the lessee does not option to purchase. The lessee usually benefits by any gain.
Fuel Peg： This refers to the initial price of fuel used in a full service lease （motor vehicles）。 Adjustments are made up or down when pegged price is compared to the actual price of fuel paid for a particular period. A “zero” fuel peg is defined as a pass through of fuel cost to the customer. Carriers use a fuel surcharge mechanism.
Full Service Lease： Also known as FSL， this form of lease provides truck， tractor， trailer equipment and the operating supplies and services needed to operate efficiently. These usually include maintenance， road service， parts and tires required due to normal wear and tear， replacement vehicles for mechanical breakdown， and washing. This service is bundled into a fixed and mileage charge with pricing components usually undisclosed. Fuel is usually sold at a pump price or as a separate charge.
Lease Term： Length of lease expressed in months or years that lessee is liable for payments （and other obligations such as insurance coverage） when executing a lease agreement.
Lift Trucks： There are many types and models of materials handling equipment produced by many different manufacturers. There are Reach trucks， Orderpickers， three-wheel machines， Walkies， sitdown machines， cushion tire or pneumatic tire equipment， powered electrically， by propane gas， gasoline， or diesel.
Materials Handling Equipment Lease： In developing a lease agreement， a lessor assesses the conditions and applications in which the lift truck will operate， as well as the number of hours it will run per year and the number of years the company wants to use it， and calculates how much the truck will be worth at the end of the lease. Next， the residual value is determined， I.e. $5000 on a $22，000 lift truck， and the lessee pays only for the difference in the lease rate.
Equipment acquisition and leasing （as an alternative to purhasing or owning equipment） is very competitive and leasing is a mature business…… Leasing represents an alternative to using cash or bank lines of credit. Experienced lessees or buyers of leased equipment know the importance of securing multiple bids based on a clear and comprehensive RFP. Contractual terms that provide for flexibility and ease of termination for change in operation should be sought. Customized contracts are normally preferred to the vendor's standard agreement.
Agreed Value ： Refers to Schedule “A” value placed on full service lease equipment （motor vehicle trucks） which lessee agrees to by execution of the Schedule “A”。 Represents delivered cost of equipment plus artwork/logo identification， local installation of accessories （on-board computers， cellular telephones， truck body or trailer modifications， safety and spill kits etc.）， “get ready service”， local sales tax if paid by lessor at time of registration， and a margin to cover sales and administrative costs. In the event of early termination lessee may have a buyout obligation and a depreciation credit is deducted from this value based on time in service. Valuation may affect lessee in the event of a casualty loss or theft as the valuation less depreciation credit is what the lessor expects to recover.
Materials Handling Operator Certification： Refers to forklift operator and that employer must certify that training and evaluations are done periodically especially after any accidents or near misses.
CPI： Refers to U.S. Bureau of Labor Statistics publication， which summarizes a series of statistical measurements of inflation or indexes， hence， Consumer Price Index. A review of the publication is necessary to select an index if it is to be used for cost adjustment. The most commonly used index is the one for “All Urban Consumers.” There are also a “Wholesale Index” and several narrowly defined indexes. Commonly used by full service lessors and dedicated contract carriers.
Date-in-Service： Delivery date of equipment pursuant to a non-maintenance lease， full service lease or dedicated transportation agreement.
Depreciation Credit： The dollar amount a vehicle depreciates per month as determined by the lessor under a full service lease contract. It is expressed on the Schedule “A” and is used to calculate a buy out value of the equipment. The number of months in service is multiplied by the credit and deducted from the Schedule “A” Agreed Value. There are usually other fees to be paid in the event of a buy out. See Agreed Value. This practice is usually applicable to all types of equipment.
Finance lease： May be in the form of an operating or capital lease and does not include maintenance or servicing. It may be structured as a FMV purchase option （fair market value） closed end lease or as a TRAC （terminal rental adjustment clause） type lease with a stated residual percentage which the lessee guarantees. A lessee will decide between a TRAC or FMV after weighing tax and rate benefits. In a TRAC lease， the lessee has the option to bid on the equipment at end of term. The lessee is liable for any shortfall （which become the terminal rental adjustment amount） in residual realization in the event the lessee does not option to purchase. The lessee usually benefits by any gain.
Fuel Peg： This refers to the initial price of fuel used in a full service lease （motor vehicles）。 Adjustments are made up or down when pegged price is compared to the actual price of fuel paid for a particular period. A “zero” fuel peg is defined as a pass through of fuel cost to the customer. Carriers use a fuel surcharge mechanism.
Full Service Lease： Also known as FSL， this form of lease provides truck， tractor， trailer equipment and the operating supplies and services needed to operate efficiently. These usually include maintenance， road service， parts and tires required due to normal wear and tear， replacement vehicles for mechanical breakdown， and washing. This service is bundled into a fixed and mileage charge with pricing components usually undisclosed. Fuel is usually sold at a pump price or as a separate charge.
Lease Term： Length of lease expressed in months or years that lessee is liable for payments （and other obligations such as insurance coverage） when executing a lease agreement.
Lift Trucks： There are many types and models of materials handling equipment produced by many different manufacturers. There are Reach trucks， Orderpickers， three-wheel machines， Walkies， sitdown machines， cushion tire or pneumatic tire equipment， powered electrically， by propane gas， gasoline， or diesel.
Materials Handling Equipment Lease： In developing a lease agreement， a lessor assesses the conditions and applications in which the lift truck will operate， as well as the number of hours it will run per year and the number of years the company wants to use it， and calculates how much the truck will be worth at the end of the lease. Next， the residual value is determined， I.e. $5000 on a $22，000 lift truck， and the lessee pays only for the difference in the lease rate.