Lease Finance

Lease – finance can be said to be a contract between Lessor and Lessee , where by the Lessor acquires the equipments/goods/plant as required and specified by the lessee and passes on the goods to the lessee for use for a specific purpose and in consideration  promises to pay the Lessor a specified sum in specified interval and at a specified place

Silent features of Lease Finance

• Lease Finance or Capital lease is a type of lease. It is a commercial arrangement where:
• The Lessee (customer or borrower) will select an asset (equipment, vehicle, 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);
• The Lessor is the owner of the assets  and is entitled to the benefit of depreciation and other allied benefits ( Ex: Under section 32AB,Income tax act )
• The Lessee claims the rentals as expenses chargeable to his income

However the lessee has control over the asset providing them the benefits and risks of (economic) ownership.