c


    

  Lease is a contract between a lessor, the owner of the asset, and a lessee, the user
of the asset. Under the contract, the owner gives the right to use the asset to the user over an
agreed period of time for a consideration called ¬
 

¬. The lessee pays the rental to the
lessor as regular fixed payments over a period of time at the beginning or at the end of a month,
quarter, half year, or year.

Although the lessor is the legal owner of a leased asset, the lessee bears the risk and enjoys
the returns. The lessee benefits if the leased assets operates profitably, suffers if the asset fails to
perform.

A lessee can be individual or a firm interested in the use of an asset without owing. Lessor may
be the equipment manufacturers or leasing companies who bring together the manufacturers and
the users. In India, independent leasing companies form the major group in number in the leasing
industry.




 

 Hire-purchase is an alternative to leasing as a source for equipment financing. Hire

purchase means a transaction where goods are purchased and sold on the terms that (1) payment
will be made in installments, (2) the possession of the goods is given to the buyer immediately,
(3) the property in the goods remains with the vendor till the last installment is paid, (4) the seller
can repossess the goods in case of default in payment of any installment, and (5) each installment
is treated as hire charges till the last installment is paid.


   

¬¬
 
 


 

Generally there is no difference between the financial lease and the hire purchase. There is a
minor difference between the two. Some of the points of difference between the two are as
follows:

1.c In case of hire purchase, ownership of the asset passes on the user (hirer) after payment
of all the installments, but in case of financial lease, the lessee (user) is entitled to use the
asset, but the lessor (owner) retains the ownership title. But at the end of the lease period
the purchase option is given to the lessee.
 2.c The hirer can charge the depreciation on the asset, while in case of lease, only lessor can
do so.
3.c Lease is for the full value of the equipment, while in case of hire purchase, a cash down
payment is generally required.

Financial lease are long term and non-cancellable lease. Examples are plant, machinery, land,
building, ships and aircraft. In India financial leases are very popular with high-cost and high
technology.

c c cc