6.3 Rental Agreement
Rental Agreement in OFSLL refers to a lease rental contract between financial institution and a customer. A lease rental contract is formed with mutual agreed terms and signifies a fixed rental amount that is paid by the customer for using an asset till the agreed term.
Rental based leasing option extends lease functionality to charge the customer with a fixed rental fee for the asset based on actual number of contract days for the defined cycle (i.e. Hourly, Daily, Weekly, and so on). Depending on the type of asset, rental leasing can either have only fixed rental or rental and usage details. OFSLL supports the following types of rental based leasing:
- Fixed Rate Rental Contract - This type of leasing is useful for equipment leasing industry where specify type of assets can be leased based on duration. For example, furniture, medical equipment, farming accessories and so on whose usage cannot be measured. Here, there is no lease receivables at the time of creating lease contract and the customer is charged with fixed rentals. For example, renting a medical equipment - Nebulizer for weekly rental of $15 or monthly rental of $30.
- Usage Based Rental Contract - In this type of leasing asset usage can also be measured such as vehicles which are leased based on usage limit + duration. Here, along with fixed rentals customer is charged for excess usage fee based on the actual usage depending on the asset type. For example, renting an All-Terrain ForkLift for 3 weeks and maximum of 120 Hours. Any excess engine hours will be charged @$25 per hour.
In either of the rental contracts, customers would also benefit by being charged only when they use an asset rather than having to buy something outright.
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