Financial leasing is a financial instrument.
Financial leasing is a kind of financial instrument, which simply means that the lessor, through cooperation with the supplier, buys the equipment or asset that the lessee wants, then leases it to the lessee for use and collects the rent in a specified period of time. Take production line leasing as an example:
The customer sells his production line to the financial leasing company at a price of 10 million yuan, and then pays 1.4 million yuan in annual rent through a 10-year lease agreement. By the end of the lease term, ownership of the production line is returned to the customer. In essence, this is a disguised form of borrowing, with the customer repaying the principal in installments and paying the corresponding interest, which totals $4 million.
This type of lease has several notable features: first, the option of equipment in the hands of the lessee, the lessor is responsible for purchasing and leasing; second, the lessor is not responsible for the quality of the leased object; third, the ownership of the equipment during the lease period belongs to the lessor, the lessee is responsible for the management and maintenance; fourth, once the contract is signed, both parties must fulfill it unless the equipment is damaged and can not be used; lastly, the end of the lease period After the lease period, the lessee can choose to continue to purchase the equipment or return it.
Overall, financial leasing is a flexible means of financing, through the form of leasing allows the lessee to use the equipment, while taking into account the needs of financing and equipment renewal.