How It Works
Although there are many types of leasing,
fundamentally, they all tend to fit into one of two
categories:
- Direct Lease. You identify the
asset (and negotiate the price) and arrange for the
leasing company to buy it from the manufacturer (if
new) or the previous owner (if used) to rent it to
you.
- Sale-and-leaseback (also called
purchase leaseback). You sell an asset you already
own to the leasing company for fair market value or
book written down value (whichever is less) and then
lease it back.
In both of the above-mentioned cases, the lessor owns
the asset and then rents it to you. As with any other
rental agreement, once the lease has ended, you will
return the asset to the lessor, although some leases
grant you an end-of-lease option to renew the lease
at a minimal cost or to sell the asset to a third party
as an agent of the lessor.
Often equipment manufacturers themselves act as lessors
or have an affiliated leasing company. This allows them
to more easily help their customers finance transactions.
The other two groups of lessors are banks and independent
leasing companies.
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Asset
Financing Guide
