Equipment Finance and Leasing

Equipment Finance and Leasing

In a finance lease (aka capital lease or sales lease), a finance company is typically the legal owner of the asset for the duration of the lease, while the lessee not only has operating control over the asset, but also has a some share of the economic risks and returns corresponding to the change in the valuation of the underlying asset.

More specifically, it is a commercial arrangement involving:

• the lessee (customer or borrower) will select an asset (equipment, software);
• the lessor (finance company) will purchase that asset;
• the lessee will have use of that asset during the lease;
• the lessee will pay a series of rentals or installments for the use of that asset;
• the lessor will recover a large part or all of the cost of the asset plus earn interest from the rentals paid by the lessee;
• the lessee has the option to acquire ownership of the asset (e.g. paying the last rental, or bargain option purchase price

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