2 min read
Definition
A finance lease transfers substantially all the risks and rewards of ownership to the lessee, who capitalises the asset and a matching liability on the balance sheet and charges depreciation and interest. Contrast with an operating lease.
In plain terms
Economically it is close to buying on credit: you get the asset for most of its useful life and shoulder the ownership risks, even though title stays with the lessor.
Why it matters for your company
Finance leasing spreads the cost of equipment while preserving cash. Compare it with a purchase funded by a loan using the asset finance calculator. See hire purchase.
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Read →Funding for UK limited companies
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