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Equipment Finance Fundamentals Flashcards

6 cards from real CLFP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 6 Equipment Finance Fundamentals flashcards as text

  1. What is a 'TRAC lease' primarily used for?

    Answer: Financing over-the-road vehicles and transportation equipment with a Terminal Rental Adjustment Clause

    A TRAC (Terminal Rental Adjustment Clause) lease is specifically designed for vehicles and transportation equipment, with a final payment adjusted based on actual vs. estimated residual value.

  2. In equipment finance, what does 'LTV' stand for and why is it important?

    Answer: Loan-to-Value; it measures how much financing is extended relative to the equipment's value

    LTV (Loan-to-Value) is a key underwriting metric that compares the financed amount to the equipment's value, indicating the lessor's collateral coverage.

  3. What is 'soft cost' financing in equipment leasing?

    Answer: Financing of non-tangible costs like installation, training, software, or freight bundled with equipment

    Soft cost financing allows lessees to include ancillary expenses like installation, training, warranties, and software in the lease, rather than paying them separately.

  4. What is the 'money factor' in equipment leasing?

    Answer: A decimal number used to calculate the finance charge portion of a lease payment

    The money factor is a small decimal (e.g., 0.00250) that represents the finance charge in a lease; multiplied by 2,400 it approximates the equivalent annual interest rate.

  5. What does 'advance payment' mean in the context of a lease structure?

    Answer: Lease payments made at the beginning of each period rather than at the end

    An advance payment structure means payments are due at the start of each period (beginning of month/quarter), as opposed to an arrears structure where payments are due at period end.

  6. What is the role of a 'broker' in the equipment finance industry?

    Answer: An intermediary who originates transactions and places them with funding sources (lessors/lenders) for a fee

    Brokers originate equipment finance transactions from end-users and earn a fee by placing those deals with funding sources, without using their own capital.

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Sources & references

Exam facts on this page (fees, format, dates, passing scores) are checked against these official sources; the date is our last check. Editorial policy

  1. clfpfoundation.org — Passing score, time limit, score validity, test delivery, eligibility, fees, exam format, retake fee, retake policy, score release · verified Oct 2026
  2. elfaonline.org — Exam information · verified Oct 2026