Review:
Finance Leases
overall review score: 4.2
⭐⭐⭐⭐⭐
score is between 0 and 5
Finance leases are a type of lease agreement where the lessee effectively assumes all of the risks and rewards of ownership. The lessor finances the asset for the lessee, who makes payments over a set period of time.
Key Features
- Transfer of risks and rewards of ownership to lessee
- Fixed payments over the lease term
- Lease period typically covers majority of asset's useful life
Pros
- Allows businesses to access assets without large upfront costs
- Provides flexibility in terms of asset management
Cons
- Potential for higher total cost compared to other forms of financing
- Lessee is responsible for maintenance and insurance of the asset