Finance Lease (Capital Lease)
Under finance lease the lease rental is fixed in such a manner that the lessor recovers the entire price of the leased equipment plus a return on investment ( made for purchasing the equipment leased) within the lease period through lease rent. In such a situation the lessee normally retains the possession of the equipment even after the lease period is over as he pays the price of the equipment. In this case, in substance there is no difference between – ‘borrow to buy’ and lease. Example 3 will clarify the matter.
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