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Lease Finance

A lease is a form of financing used by a firm to acquire the use fo assets. Through lease, business firms can acquire the economic use of assets for a stated period of time without owning it. Every lease involves two parties-the user of the asset known as the lessee, and the owner of the asset known as the lesser.

Conceptually, a lease may be defined as a contractual  arrangement in which a party owning an asset/equipment provides the asset for use to another the end of the period of the contract, the asset/equipment reverts back to the lesser unless there is a provision for the renewal f the contract.

Leasing essentially involves the separation of ownership from the economic use of an asset/equipment. It is a contract in which a specific equipment required  by the lessee is purchased by the lesser (financier) from a manufacturer/vendor selected by the lessee. The lessee has possession and use of the asset on payment fo the specified rentals over a predetermined period of time. Leasing is, thus, a device of financing/money lending. The position of a lessee is akin to that of a person who owns the same asset with borrowed money. The real function of a lesser is not renting of asset but lending of funds/finance/credit and lease financing is, in effect, a contract of lending money. The lesser is the nominal owner of the asset as the possession and economic use of the equipment vests in the lessee. The lessee is free to choose the asset according to his requirements and the lesser does not take recourse to the equipment as long as the rentals are regularly paid to him.

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