3. DEFINITION
A written agreement under which a property
owner allows a tenant to use the property for a
specified period and time.
The lessee(person who taking out a lease)
agrees to pay number of fixed and flexible
installments over an agreed period to lessor,
who remains the owner of asset(item)
throughout the period of the lease.
4. FEATURES
• Leasing a product is similar to renting it.
• A contract lasts over number of
years,usually between 2 and 10
,depending on cost and usable life of
the product.
• Have the full use of the piece of
equipments with out having to pay full
cost of the equipment item in one go.
• Lessor and lessee
5. ADVANTAGES
• Shifting the risk of technological obsolescence to the
owner risk
• Easy source of finance
• Enhance liquidity
• Conserving borrowing cappacity through of the balance
sheet financing
• Maintenance and specialized services
• Improved performance as reflected improved turnover
• Lower administrative cuts as compared to other source
of finance
6. DISADVANTAGES
• Alteration and change in the
asset.
• Terminal value of the asset
• To make lease payments even if
the asset become obsolete.
7. TYPES OF LEASING
FINANCE LEASE
OPERATING LEASE
LEVERAGED LEASE
SALE AND LEASE BACK
DIRECT LEASE
8. FINANCE LEASE (CAPITAL LEASE)
• Long-term, non-cancellable lease contracts are
known as financial leases.
• The essential point - it contains a condition
whereby the lessor agrees to transfer the title for
the asset at the end of the lease period at a
nominal cost.
• At lease it must give an option to the lessee to
purchase the asset he has used at the expiry of
the lease.
9. • All the risks incidental to the asset
ownership are transferred to the lessee who
bears
• the cost of maintenance
• Repairs and insurance
• Only title deeds remain with the lessor
• High cost and high technological equipment
10. OPERATING LEASE
• Contrast to the financial lease
• A lease agreement gives to the lessee only a
limited right to use the asset.
• The lessor is responsible for the upkeep and
maintenance of the asset.
• The lessee is not given any uplift to purchase
the asset at the end of the lease period.
11. LEVERAGED LEASING
• A third party is involved beside lessor and lessee.
• The lessor borrows a part of the purchase cost
(say 8 0%) of the asset from the third party,
lender
• The asset so purchased is held as security against
the loan.
• The lender is paid off from the lease rentals
directly by the lessee and the surplus after
meeting the claims of the lender goes to the
lessor.
12.
13. SALE AND LEASE BACK
• Sub-part of finance lease
• The owner of an asset sells the asset to a party
(the buyer), who in turn leases back the same
asset to the owner in consideration of lease
rentals.
• Under this arrangement, the assets are not
physically exchanged but itall happens in records
only
14. DIRECT LEASING
• Under direct leasing, a firm acquires the right to
use an asset from the manufacturer directly.
• The ownership of the asset leased out remains
with the manufacturer itself
16. LEASE AGREEMENT
• A document under which a landlord and tenant
set forth the rights and obligations of each party
with respect to an apartment, rental unit, or other
real property owned by the landlord and used by
the tenant.
• An instrument conveying the possession of real
property for a fixed period in consideration of the
payment of rent
