AFM391 Chapter Notes - Chapter 20: Finance Lease, Operating Lease, Startup Company
8 Dec 2017
School
Department
Course
Professor
Document Summary
A lease is a contractual agreement between a lessor and lessee that gives the lessee, for a specified period of time, the right to use specific property owned by the lessor for payments. In canada, usually one of 3 types of companies: Manufacturer finance companies: subsidiaries whose main purpose is to perform leasing operations for parent company (i. e. honda canada finance inc. ) Independent finance company: financial intermediary for transactions for manufacturers, vendors, or distributors (i. e. person ordering equipment through a manufacturer, who may in turn outsource financing to a lessor such as an independent finance company) Often no down payment, helping to conserve scarce cash. Lease payments often remain fixed, which protects lessee against inflation/interest rate increases. Leasing reduces risk of obsolescence to lessee, and risk of residual value to lessor. Less restrictive provisions than debt; can tailor. Less costly financing for lessee, tax incentives for lessor.
