Capital Lease sometimes also referred to as a Finance Leasing is a type of financial services, and in enterprise it is among foreign sources of funding. Financial leasing is a type of leasing, its essence is a long-term lease where, after the lease period the tenant usually buys the leased asset. Term of the lease in financial leasing usually coincides with the economic useful life of the subject of lease. The total lease payments cover the cost of asset and the redemption price is usually lower than the market price of the asset.
The leased asset must be always insured.
- Leasing with the obligation to purchase the asset
- Leasing with the right to purchase the asset
The lessor is usually a bank or a leasing company.
Financial Leasing in practice: