You're an expert when it comes to your truck, but what about truck financing? Use the following common truck financing terminologies listed below to assist you in making informed decisions to grow your business, or to manage your fleet more efficiently
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Higher initial payments reduce the principal by a greater percentage, resulting in lower payments and improved equity during the latter portion of the contract or lease.
Features and enhancements which may be installed on equipment.
Refers to payments collected at the beginning of each period instead of the end. Opposite of arrears.
A percentage that reflects the amount actually loaned compared to the dealer's cost or invoice amount (a leasing term).
A company having common corporate ownership or control with another company. For example, DTF and Freightliner LLC would be considered affiliates because of common ownership.
A condition whereby a customer modifies the equipment in some fashion.
To pay off a debt gradually, usually by periodic payments of principal and interest.
A document completed by a prospective customer containing information about the customer and the equipment he/she is buying.
On a lease account, arrears payments set the first payment to 30 days from the lease date. This is the opposite of payments in advance.
Used on the balance sheet to classify items the entity already has or is entitled to, such as cash, receivables and owned equipment.Back to Top
Write-off relating to unpaid payments and discounted future payments.
(1) The final lump-sum payment under a retail contract. (2) A large payment at the end of the loan allowing smaller payments to be made during the term.
An action taken by a party to legally protect its remaining assets by declaring that it cannot pay its bills. Typically, in this situation, liabilities exceed assets.
One who benefits from the act of another; for example, the person designated to receive property under an insurance policy or a trust.
A document issued by a manufacturer or supplier showing that the equipment has been sold to the buyer.
An insurance contract which provides temporary protection until a permanent contract can be arranged.
The amount a lessee must pay the lessor to terminate a lease early. Usually calculated to include tax recaptures and lost revenues.Back to Top
A ceiling on the maximum interest rate on a loan or borrowing, which may vary from province to province.
For accounting purposes, a lease in which the lessee is required to show leased assets on its balance sheet. Amount recorded is the lesser of the cost of leased assets or the present value of minimum lease payments, unless otherwise required by applicable laws or accounting principles.
The cost of equipment to be leased plus any other initial direct costs that may be capitalized.
A separate company which is an affiliate of a manufacturer that finances products produced by the manufacturer.
(1) A measure of an organization's liquidity that compares cash inflows and outflows, often shown by adding noncash expenses to net income. (2) After-tax profit plus non-cash charges (depreciation).
(1) A lease agreement under which the lessee (customer) bears no responsibility for the equipment's residual value at lease maturity, assuming normal wear and tear. (2) A vehicle lease in which the lessor absorbs the entire risk of the residual. (3) A lease where the lessee has turn-in conditions, but not residual, responsibility.
Equipment or other tangible assets like a house, car or stocks pledged as security for a loan or other obligation.
A contract through which a customer purchases the vehicle as owner, financing a portion of the purchase price and granting a security interest in the vehicle to the finance source.
A document signed by a registered corporate officer (usually a corporate secretary), designating company representatives who may sign legal commitments.
An officer charged with keeping the corporation's records and official correspondence and with giving and receiving notices, countersigning documents, etc.
An entity made up of one or more shareholders who are not personally liable for the obligations of the corporation. Because a corporation is considered distinct from its shareholders, a corporation can sue in its own name and be sued, and is also a taxable entity.
Banks and suppliers listed on the credit application. Lenders may contact them to check an applicant's payment habits.
Guarantee by one or more parties guaranteeing all current and future indebtedness.
Guarantee by an affiliated corporation (usually the parent) of the borrower to minimize lender's risk in the event of default.Back to Top
Abbreviation for "doing business as." Trade name used by an individual or business (e.g., Joe Smith dba Smith Packaging), which is not recognized as a separate legal business entity.
An obligation resulting from the borrowing of money or from the purchase over a period of time of goods or services and may include payments under a lease.
A condition whereby the customer does not fulfill their contractual obligations.
The difference between the amount owed under the contract or lease and the net proceeds received from the sale of the equipment.
Money paid by the borrower towards the equipment purchase to reduce the amount to be financed.Back to Top
The electronic movement of funds.
Tangible assets such as tractors, trucks or trailers.
The process of deferring a specific monthly payment in return for an extension fee and the borrower's promise to pay at a later date.Back to Top
(1) The current market price for a piece or type of equipment. (2) Actual dollar market value of leased vehicle at lease maturity (may also be stated as the realized value). (3) The theoretical amount of periodic rental that should be paid for an asset.
Reports presenting a company's financial condition: balance sheet, income statement, cash flow statement and footnotes.
Rate fixed for the loan term on the date the loan agreement is signed.
A true lease for tax purposes. The FMV is a walk away lease, which means that at the end of the lease, the customer has no obligation to Daimler Truck Financial beyond returning leased assets and meeting any specific return-vehicle condition requirements.
1 A customer interest rate that is tied to a nationally recognized market or banking interest rate. There are many variations of a floating
rate but the most common used within DTF is a fully floating rate which means the customer's rate moves anytime the designated national rate
2 The interest rate which fluctuates with an economic indicator, like the prime rate. Used to determine adjustment in floating rate contracts.
The expected value at a specified future date of a payment or a series of payments which are invested at a specified rate until such future date.Back to Top
Guaranteed Automobile Protection or Deficiency Balance Protection. A contract which eliminates or reduces the monetary liability between actual cash value of the vehicle and the payoff amount on a retail contract or lease when the vehicle is deemed a total loss or stolen.
An unincorporated business owned by two or more persons or entities. Normally, any partner can sign contracts on behalf of the partnership, and each partner is personally liable for the obligations of the partnership. Partnerships are non-taxable entities; all gains and losses flow through to the partners.
The period of time after the due date that a lender allows for receiving the monthly payment without penalty.
The party that promises to make payments to the lender in the event the borrower does not.Back to Top
The date the contract is signed by the customer. Used to legally bind the customer to the contract.
The difference between the total loan payments and original loan amount (principal) excluding any third party expenses such as insurance premiums, taxes and filing expenses.Back to Top
A charge that is assessed if payment has not arrived on the due date or within a specified grace period. See your specific contract for details.
(1) A form of financing in which a lessee can use equipment over a period of time in return for making periodic payments to a lessor.
(2) A contract through which an owner of a vehicle conveys the right to rent and possess the vehicle to another party.
End of lease term.
Also called rentals. The amount the lessee pays the lessor in return for using the leased equipment.
An attachment to a master lease, stating specific equipment and lease terms. Additional equipment may be leased by the execution of additional lease schedules.
A document which certifies the legal owner of a piece of equipment.
The party who lends money to the borrower.
(1) The party who uses the equipment in a leasing transaction and makes periodic payments to the owner or lessor.
(2) Renter of leased vehicle.
A broad legal term which encompasses all types of debts and other obligations.
A security interest on property to protect the lender in the event of default.
Person or company having a security interest in a financed vehicle or other asset until the contract is paid off or other specified conditions are fulfilled.
A hybrid business organization in which the owners (known as Members or Managers) are not personally liable for the LLC's obligations. An additional benefit is that an LLC is not considered a taxable entity.
A Limited Partnership is a partnership comprised of one or more General Partners who manage the business and who are personally liable for partnership debts, and one or more Limited Partners who contribute capital and share in profits but who take no part in running the business and incur no personal liability for partnership obligations.
Deficiency resulting from the sale of equipment. Tax treatment may be capital or ordinary, depending on type of property and period held.Back to Top
A governing lease contract which facilitates multiple leases to the same lessee by the use of lease schedule addenda.
The date on which the principal amount or partial amount of the principal amount on a debt or obligation becomes due and payable.
Amount due monthly on a contract.Back to Top
A duty imposed by law or contract; any written promise or contract to pay money or to do a certain thing.
(1) Any lease agreement under which the lessee (our customer) is responsible for the residual value of the equipment upon lease maturity; if the equipment sells for less than the residual, the lessee must account for the difference, but if the equipment sells for more than the residual, the lessee is entitled to the overage. (2) A vehicle lease in which the lessee is responsible for a specific residual amount at the end of the lease term.
A condition whereby equipment no longer has value to potential buyers. Commonly applies to computers and other high-tech equipment.
For accounting purposes, a lease in which the lessee is not required to show leased assets on its balance sheet.Back to Top
A corporation that has at least one subsidiary corporation.
A member of a partnership. Ordinarily refers to a General Partner, but could also be used to refer to a Limited Partner.
The amount owed to date, to terminate the loan account and remove the lienholder.
(1) To release title within five business days, DTF needs the payoff in the form of certified funds (i.e. money order, bank draft, certified cheque).
(2) If the cheque is a personal/business check, DTF holds the title for 30 days.
First payment due on delivery.
First payment due 30 days after delivery
The aggregate amount of rents under a lease.
A document held by the finance company in a finance transaction allowing him to pursue an individual for payment should the customer default.
A written instrument whereby one person appoints another as their agent and confers authority to perform certain specified acts on their behalf.
The amount of the original loan paid to the borrower by the lender. Also called loan proceeds.
Personal Property Security Act used in common law provinces under which lenders register their security interest against specific collateral and debtors.
A document issued by provincial taxing authorities to certain entities not required to pay provincial sales tax.Back to Top
A percentage amount that, when multiplied by the original equipment cost, produces the monthly rental.
The situation whereby a lender reclaims and physically removes the equipment from the control of the borrower; usually due to default.
(1) Estimated dollar value of leased vehicle at lease maturity, fixed at lease inception. (2) The future estimated value of equipment on lease.
A contract through which a customer purchases the vehicle as owner, financing a portion of the purchase price and granting a security interest in the vehicle to the finance source.Back to Top
A state or local tax on equipment sales as well as other commercial goods. Also called use tax in certain cases.
A document issued by taxing authorities to certain entities not required to pay tax, like municipalities and religious organizations.
Formal proof that the board of directors of a corporation has passed a Resolution.
Interest on the original principal which is calculated only on the unpaid balance and paid periodically over the contract term. Accumulated interest is not included in subsequent calculations.
A contract which provides for the skipping of payments during a slow or inactive business period for the customer.
A form of business in which one person owns all the assets of the business. The sole proprietor is personally liable for all debts of the business. No legal entity is created, just a dba (the name the individual does business under).Back to Top
An organization that may issue or incur tax-exempt obligations.
The number of months from contract inception to termination.
An open-end lease in which the residual amount is fixed and guaranteed to Daimler Truck Financial. The lessor may still treat this as a true lease. Any shortfall between booked and realized residual is the responsibility of the lessee. Consult with your accountant or tax advisor for any accounting or tax implications.Back to Top
Provincial laws regulating the maximum rate of interest that may be charged to customers in a specific province on specific types of loans. These laws tend to apply to consumer goods but, depending on provincial law, could apply to commercial goodsBack to Top