What is a financial rental?

, also known as a capital lease, is a financial lease of a situation where a financial company or other landlord buys an asset and then rents this asset to the client or tenant for a certain period of time. At this point, the client is taken over by assets and it is free to use the asset throughout the lease. Once the client meets the conditions of the leasing, including the payment of any valid interest, the client usually has the opportunity to purchase an asset from a financial company at an extremely low price.

The exact duration of financial lease will vary depending on the nature of the asset and conditions agreed by the client and financial companies. Some agreements on this type are created as a long -term agreement, while others require the transition. For the life of leasing, the landlord retains the ownership of the asset. The client has full use of asset and therefore has most of the benefits of ownership. However, the lessee also assumes many ownership obligations, although it retains this status.

One of the simplest ways to understand how the financial leasing functions are to consider an idle lease for a new vehicle. The landlord and the buyer or tenant agree that the lessee will rent a new vehicle for a number of payments, with one payment due to each calendar month throughout the lease. During this period, the landlord is still the owner of the record, but the lessee is responsible for maintenance and most of the repairs on the vehicle, except for those who specifically deal with the conditions of the lease. At the end of the lease, the tenant has the opportunity to buy a vehicle from the landlord, usually very little and become a full owner of the car.

This type of commercial arrangement differs from a similar agreement known to the lease. With operating leasing, the tenant has only limited access to asset; With a financial lease agreement, the tenant has complete use. In addition, the landlord usually acquires complete investmenttici plus a small return for a lifetime of financial rental; This does not necessarily have to be a case of operating rental, where the landlord may still have an outstanding amount of investment that has not been obtained.

capital or financial leasing functions according to regulations introduced in jurisdiction, where the agreement is concluded. Different nations have determined the criteria for what the rent of this type. In the United States, the capital lease must meet one of the four basic qualifications. The lease must offer the possibility of transferring ownership to the lessee at the end of the lease; There must be a convenient purchase option, which is less than the current real market value of the asset. In addition, the duration of the lease must be at least equal to 75% of the expected life of the asset; And the total value of rental payments must be at least 90% of the original amount paid by the landlord for obtaining an asset.

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