The significant features of finance lease are :
- Lease rental over the lease period covers the cost of leased asset plus a return on investment made by the lessor for the leased asset.
- Though the lesser may continue to remain the legal owner of the asset, but for all practical purposes (i.e. in substance), risk and reward associated with ownership is substantially transferred to the lessee since the inception of the lease.
- The lessee bears the maintenance cost, insurance and taxes of the asset.
- Under the lease agreement, the lessee is not entitled to cancel or terminate the lease except at a very high penalty. This means lessee must pay the lease instalment otherwise lessor will sue him for nonpayment of unpaid instalments with cost and damage in the capacity of a creditor.
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