‘Lease Termination’ in OFSLL indicates the 'Return of Leased Asset' in which a Lease Account is allowed to be terminated either before or after the Lease Maturity Date. Early Termination indicates terminating a lease account before its maturity date.
In a lease termination, the account is either Charged-Off or Paid-Off clearing all outstanding dues and deriving the net Gain or Loss in specific buyout scenario as indicated below.
This section consists of the following:
During lease termination, the leased asset can be returned or purchased by paying the residual amount. Accordingly, lease Termination can be posted in either of the following ways:
Type |
Action |
Termination with buyout |
Here, the input 'Sale Price' of asset is compared with 'Outstanding Bills + Book Residual Value' of asset to derive Gain / Loss. |
Termination without buyout |
Here, Outstanding Bills + Book Residual Value is posted to 'Inventory'. |
Note
During either of the termination types, the inventory balance is not accounted in total of the balances populated in Customer Service > Transaction History > Balances > Current Balance tab. The entry is posted as Current Balance Total (Excluding Inventory).
This workflow of lease termination is detailed below and is broadly explained in three stages:
In the first stage:
Note
At the time of contract creation user can indicate the preference of 'Asset Purchase' and instruct to include 'Residual Value' (Either Book Value or Market value) in final statement automatically. However, this amount is included only in account statement and not included in the bill.
In the second stage:
In the third stage:
On posting ‘Lease termination transaction’ either before or after maturity date, following actions are performed by the system on the lease account:
For example, on posting a fee (Early Termination Fee of 120$) while posting termination, on effective termination the balances radio button will have 'Termination balance' and 'Early Termination' Fee balance as outstanding payable.
Following are the actions performed in systems during lease Termination against the specific Lease Type:
Actions in systems during lease Termination against the specific Lease Type |
Rent Factor – without Buyout |
Rent Factor – with Buyout |
Interest Rate – without Buyout |
Interest Rate – with Buyout |
Comment |
Early Termination (Before Maturity Date) |
Rent rebate posted – If applicable |
Rent rebate posted – If applicable |
‘Interest Accrual’ transaction is posted |
‘Interest Accrual’ transaction is posted |
|
Normal Termination (Post Maturity Date) |
-- |
-- |
‘Interest Accrual’ transaction is posted |
‘Interest Accrual’ transaction is posted |
User may have to post payment transaction multiple times; as ‘Interest accrual’ happens after termination and no payoff quote is available to post exact payment. Residual value is included in final statement. |
Due Date History |
Payment Received flag is updated to Y (Irrespective of payment received or not) |
Payment Received flag is updated to Y (Irrespective of payment received or not) |
Payment Received flag is updated to Y (Irrespective of payment received or not) |
Payment Received flag is updated to Y (Irrespective of payment received or not) |
If Termination reversed, this flag reinstates to normal. |
Balances (If Termination posted) |
‘Current Balances’ on account would be moved to ‘Terminate’ Balances. While moving the balances, system ‘Terminates’ all individual balances and any outstanding dues (Lease Receivables, Rent, Fee etc) would be tracked against the consolidated balance called ‘Termination Balance’. |
‘Current Balances’ on account would be moved to ‘Terminate’ Balances. While moving the balances, system ‘Terminates’ all individual balances and any outstanding dues (Lease Receivables, Rent, Fee etc) would be tracked against the consolidated balance called ‘Termination Balance’. |
‘Current Balances’ on account would be moved to ‘Terminate’ Balances. While moving the balances, system ‘Terminates’ all individual balances and any outstanding dues (Lease Receivables, Rent, Fee etc) would be tracked against the consolidated balance called ‘Termination Balance’. |
‘Current Balances’ on account would be moved to ‘Terminate’ Balances. While moving the balances, system ‘Terminates’ all individual balances and any outstanding dues (Lease Receivables, Rent, Fee etc) would be tracked against the consolidated balance called ‘Termination Balance’. |
|
Transactions |
All balances are terminated (negated) and specifically ‘Inventory’ transaction is posted on account. Inventory = Unbilled Amt + Residual Value |
All balances are terminated (negated) and Specifically following txns posted: Gain /Loss of Asset Terminate Depreciation Terminate Residual Terminate Interest Accrued Terminate Fee Receivable Terminate Tax Terminate Lease Receivables Gain / Loss on Asset = Sale Price - (Unbilled Amt + Residual Value) |
All balances are terminated (negated) and specifically ‘Inventory’ transaction is posted on account. Inventory = Unbilled Amt + Residual Value |
All balances are terminated (negated) and Specifically following txns posted: Gain /Loss of Asset Terminate Depreciation Terminate Residual Gain / Loss on Asset = Sale Price - (Unbilled Amt + Residual Value) |
Gain / Loss and Inventory information is shown as ‘Termination Txn’à Result. These are shown under ‘Transaction History’ and not shown under Balances. |
Balances à Current Balance |
Inventory balance is not accounted in total of balances in Lease à Customer Service à Transaction History à Balances à Current Balance. (Label also read as Current Balance Total (Excluding Inventory)) |
|
Inventory balance is not accounted in total of balances in Lease à Customer Service à Transaction History à Balances à Current Balance. (Label also read as Current Balance Total (Excluding Inventory)) |
|
|
Payoff Quote |
Not generated after termination |
Not generated after termination |
Not generated after termination |
Not generated after termination |
|
Statement |
Not generated after termination |
Not generated after termination |
Not generated after termination |
Not generated after termination |
|
Paid off (after termination) |
Pay amount in full and any excess amount can be refunded |
Pay amount in full and any excess amount can be refunded |
Pay amount in full and any excess amount can be refunded |
Pay amount in full and any excess amount can be refunded |
|
Charge off (after termination) |
Only allowed to post after termination All balances would be moved to ‘Deficiency’ bucket. Any payment after ‘charge off’ would show under ‘Recovery’ bucket. Account will be closed after certain no. of days (based on system parameter) |
Only allowed to post after termination All balances would be moved to ‘Deficiency’ bucket. Any payment after ‘charge off’ would show under ‘Recovery’ bucket. Account will be closed after certain no. of days (based on system parameter) |
Only allowed to post after termination All balances would be moved to ‘Deficiency’ bucket. Any payment after ‘charge off’ would show under ‘Recovery’ bucket. Account will be closed after certain no. of days (based on system parameter) |
Only allowed to post after termination All balances would be moved to ‘Deficiency’ bucket. Any payment after ‘charge off’ would show under ‘Recovery’ bucket. Account will be closed after certain no. of days (based on system parameter) |
|
Restriction on transactions after posting termination (System doesn’t allow to post these transactions, once termination is posted) |
Monetary txns: LEASE CHANGE PAYMENT AMOUNT RESCHEDULE BILL CYCLE LEASE EXTENSION EVERGREEN LEASE Non-monetary txn: ACCOUNT CONTRACT MAINTENANCE ACCOUNT PAYMENT MODE MAINTAINANCE STATEMENT PREFERENCE MODE ADD NEW ASSET and |
Monetary txns: LEASE CHANGE PAYMENT AMOUNT RESCHEDULE BILL CYCLE LEASE EXTENSION EVERGREEN LEASE Non-monetary txn: ACCOUNT CONTRACT MAINTENANCE ACCOUNT PAYMENT MODE MAINTAINANCE STATEMENT PREFERENCE MODE ADD NEW ASSET and |
Monetary txns: LEASE CHANGE PAYMENT AMOUNT RESCHEDULE BILL CYCLE LEASE EXTENSION EVERGREEN LEASE Non-monetary txn: ACCOUNT CONTRACT MAINTENANCE ACCOUNT PAYMENT MODE MAINTAINANCE STATEMENT PREFERENCE MODE ADD NEW ASSET and |
Monetary txns: LEASE CHANGE PAYMENT AMOUNT RESCHEDULE BILL CYCLE LEASE EXTENSION EVERGREEN LEASE Non-monetary txn: ACCOUNT CONTRACT MAINTENANCE ACCOUNT PAYMENT MODE MAINTAINANCE STATEMENT PREFERENCE MODE ADD NEW ASSET and |
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ACCOUNT EVENT NOTIFICATION (Involuntary repossession)" |
ACCOUNT EVENT NOTIFICATION (Involuntary repossession)" |
ACCOUNT EVENT NOTIFICATION (Involuntary repossession)" |
ACCOUNT EVENT NOTIFICATION (Involuntary repossession)" |
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On posting pay-off quote the residual amount is considered as a separate line item and not tracked as part of any due / Pay-off amount.
The result section in Customer Service > Maintenance > Terminate Monetary Transaction indicates the GAIN or LOSS of asset and value derivation.
Selecting ‘Terminate Balance’ option in Customer Service > Transaction History > Balances indicates the Fee captured during termination transaction and Outstanding Due Amount payable (which is the (net Bill Amount - Amount Paid) + Interest Accrued as on termination date).
The Transaction History table in Customer Service > Transaction History tab indicates the Gain or Loss arising out of termination with asset buyout calculated as Sale Price - (Unbilled Amount + Residual Value). System also posts the ‘Interest Accrued’ transaction indicating the accrued interest as on date of termination. This amount is used to post payment.
In Customer Service > Summary screen > Delinquency Information section, the total outstanding amount is cleared.
In Customer Service > Transaction History > Due Date History tab, after posting the termination transaction, all the ‘Pmt Received’ based on Days Past Due is set to ‘Y’.
For Lease termination with buyout where there are no outstanding dues, the Paid off transaction is posted from Customer Service > Maintenance screen and is updated into the Payment Maintenance screen.
For Lease termination with buyout where there are outstanding dues, the Charged off transaction is posted from Customer Service > Maintenance screen and the Balances in Transaction History is updated. The account is marked as CHARGED OFF.