Lease Financing
Lease Financing
In lease financing, a financial institution buys many different types of fixed assets, such as vehicles or equipment, and then leases them to business customers. Generally, the institution does not provide lease financing services to individual consumers in the same way that it provides these services to business customers. The auto industry has taken advantage of lease financing arrangements and has been instrumental in finding lessors to provide lease financing for vehicles to individual consumers.
Things To Know
- Financial institutions lease assets to business customers.
- Examples of assets include machinery, vehicles, and computers.
How it works
Here is how it works: a business customer (lessee) will enter into a contract with the financial institution (lessor) to use one or more items. In exchange for using an item, the customer makes regular payments to the lessor. The contract spells out the amount and schedule of payments, responsibilities for repairs and maintenance, and how long the agreement will remain in effect. At the end of this term, some contracts permit the customer to purchase the item for a specified amount.
Financial institutions may provide lease financing for many different items, including trucks, vans, cars, and other vehicles; as well as equipment such as computers, furniture, machinery, fax machines, and copiers.
