Leasing is a form of credit through which an object is transferred to a long-term lease with the subsequent right to purchase or return. You can lease special machinery, equipment and real estate.
Leasing, participants in a leasing transaction
Leasing is considered a set of legal and economic relations. The lessor acquires the property that the recipient of the loan indicates in the contract. After that, the lessor allows the recipient of services to use the property for some time for a certain fee. In this case, the recipient of the services retains the right to purchase the property.
Leasing, as a form of a loan agreement, provides that the lessor gets the opportunity to choose the seller of the property at his own discretion. The objects of leasing are equipment, special equipment, machinery and other products.
Leasing is an extremely popular form of lending. Several parties are involved in the process. The first party is the lessor or property owner. It is he who provides the property for rent in accordance with the terms of the leasing agreement.
The lessor can be financial companies that were created to carry out leasing operations; subsidiaries of commercial banks, the Charters of which allow such activities. Also, lessors can be specialized leasing companies that undertake not only the financial support of the transaction, but also the performance of non-financial services: maintenance and repair of property, provision of advice on the use of equipment, etc.
The second object of the leasing transaction is the lessee or the real user of the leased property. It can be a legal entity regardless of the form of ownership. The third subject of a leasing transaction is a property seller who sells equipment, tools, or any other product to a supplier (lessor). It can be any legal entity. Of course, the actual number of participants in a leasing transaction may vary. It all depends on certain economic conditions.
Leasing types
Based on the composition of the participants, all leasing transactions can be divided into direct and indirect leasing. In direct leasing, the owner leases the property directly. According to experts, such leasing takes no more than 5-7% of all concluded contracts.
The transfer of property in indirect leasing is carried out through an intermediary. This can be a classic three-way deal (supplier - lessor - lessee) or a large deal with a large number of participants. The latter option is often encountered when financing large-scale projects.
Speaking of leasing as a form of lending, one can distinguish between financial leasing and operational leasing. A finance lease is an agreement that provides for the repayment of lease payments. In this case, we are talking about covering the full cost or a significant part of the depreciation of the equipment, as well as additional costs arising from the transaction. Usually it is financial leasing that has a longer agreement period.
If we consider operational leasing, then it applies to lease relations. At the same time, the total expenses of the lessor are not covered by lease payments during the period of only one leasing contract. Overlapping becomes possible only through the conclusion of multiple lease agreements.
