What Is a Lease Rate?

A lease rate is the amount of money paid over a specified time period for the rental of an asset, such as real property or an automobile. The lease rate—the amount the lessor earns from allowing someone else to use their property—compensates them for not being able to use th♎at property during𓆏 the term of the lease.

How a Lease Rate Works

The meaning of lease rate depends on the context in which it isꦡ being used—namely what type of property is being leased.

In 澳洲幸运5官方开奖结果体彩网:commercial real estate, the lease rate is the cost to occupy the space, commonly stated as a dollar amount per squareও foot of space per year. The lease rate can also be stated in terms of dollars per month—as with a rental agreement—or even dollars per year.

The terms of the lease will spell out the time period that the lease rate applies for—it may also spell out incremental increases in the lease rate ov꧑er multi-year leases.

To get a true idea of the cost of renting a space (in addition to the lease rate), the potential tenant will need to know if the lease is single, double, or 澳洲幸运5官方开奖结果体彩网:triple net. A single net lease is 🐲a commercial real estate lease agreement in which the tenant agrees to pay property taxes in addition to 🍃rent.

A double net lease is a rental agreement whereby the tenant agrees to cover the costs of two of the three primary prope🗹rty expenses: taxes, utilities, or ins🌊urance premiums. Also known as a net-net (NN) lease, these are most commonly found among commercial tenants.

Finally, a triple net lease (triple-Net or NNN) is a lease agreement on a property whereby the tenant or lessee promises to pay all ♈the expenses of the property, including real estate taxes, building ins𒊎urance, and maintenance. 

Because most commercial lease rates are set out in dollars per square♛ foot, it makes it easier for the potent♊ial lessee (tenant) to compare the leasing costs of properties with different size profiles.

Special Considerations

The question of when to lease equipment or space—rather than building or buying—is one that businesses struggle with. Generally speaking, the key factor is how long the leased property is expected to be in use. For shorter-term surges in equipment demand or operational expansion (pushed by temporary market conditions), leasing is an excellent solution that minimizes 澳洲幸运5官方开奖结果体彩网:sunk costs.

If the increased demand is expected to be long-term, then the up-front costs of ownership usually dwindle in comparison with the savings over time and the potential for 澳洲幸运5官方开奖结果体彩网:appreciation in a commercial property.

That said, some companies prefer to lease over the long term anyway, as it relieves the company from having to worry about non-core business issues like eq🃏uipment and building maintenance.

Types of Lease Rates

Auto Leases

When it comes to cars and equipment, the leasing company essentially buys the car from the dealer and rents it 𒊎to you. So the lessor has “lent” the money for thꦬe purchase upfront and you are paying back on that loan.

Although the dealer and the leasing party can be the same person, setting up the three-party agreement allows the dealership to sell inventory to the leasing arm and the leasing arm to generate income on thes⭕e pseudo loans before moving the vehicle back into the dealership as used inventory. The lessee gets a car that they can use without the burden of ownership.

In the case of an automobile lease, the monthly payment on the vehicle is based on the car's expected depreciation and residual value—a predetermined amount that the car will be worth at the end of the lease term—as well as the lease rate, which is usually stated as a percentage. Through monthly payments, the lessee compensates the automobile dealer for both the vehicle's depreciation and for tying up assets in vehicles instead of investing that money elsewhere.

In this case, the lease rate is roughly equivalent to an interest rate. The 澳洲幸运5官方开奖结果体彩网:lease payments include the lease rate factor, also called the 澳洲幸运5官方开奖结果体彩网:money factor, that captures the fin💦ancing element of ca♛r leases.

Space Leases

In the case of commercial property, the building has been constructed as an investment with the hopes of bringing in tena♏nts. There are only two entities in this transaction, and any compensation for the initial investment in the 𓆏building is baked into the lease rate as part of the overall business plan.