Financial lease contract

Finance Lease Contract

This Finance Lease Contract (the Contract) is made between [Lessor], a company duly organized and existing in [State], hereinafter referred to as Lessor, and [Lessee], a company properly organized and existing in [State], hereinafter referred to as Lessee.

The parties to this Contract agree that the Lessor will finance the lease of [description of equipment or type of property to be leased] (the Leased Property) to the Lessee, according to the terms and conditions specified in this Contract.

1. Lease Terms:

Lease Term: ______________________________

Lease Payment: ___________________________

Start Date: ______________________________

2. Terms of Payment:

The Lessee agrees to make payments in the amount specified above, on the date specified in this Contract. The payments may be made by cash, check, or other negotiable instrument.

3. Taxes and Fees:

The Lessee is solely responsible for any taxes or fees assessed for the Leased Property.

4. Security Interest:

The Lessor has a security interest in all Leased Property, as well as any proceeds from or proceeds derived from the Leased Property. The Lessee hereby grants the Lessor the right to take whatever action is necessary or desirable, including but not limited to enforcement of the security interest, repossession or sale of the property subject to said interest, to protect and secure the Lessor’s interest in the Leased Property.

5. Representations and Warranties:

The Lessee represents and warrants that it has the right and authority to enter into this Contract and that its execution will not violate any agreement or law to which it is party.

6. Rights and Obligations:

The rights and obligations of the parties to this Contract shall be governed by and construed in accordance with the laws of the State of [State].

The parties to this Contract acknowledge and agree to all of the terms and conditions of this Contract, and hereby execute the same on the date and year first mentioned above.

Lessor:

___________________________

Lessee:

___________________________

A finance lease is an agreement between a lessee and a lessor which allows the lessee to use specific assets for an agreed period of time in exchange for periodic payments to be made to the lessor. It is also known as an operating lease.

A finance lease is not a simple rental agreement, as the lessee still owns the asset for the duration of the lease, but does not possess the legal rights associated with ownership until the end of the contract. At the end of the agreed lease period, the lessee can either exercise the option to purchase the asset, or return the asset to the lessor.

Finance leases differ from capital leases in that the lessor transfers none of the benefits and risks of ownership to the lessee, instead agreeing to undertake specific maintenance and repair obligations. The lessee is usually responsible for routine servicing and repairs as well as insuring the asset.

Due to its nature, a finance lease is most often used in the purchasing of high-value, long-life assets such as vehicles, plant and machinery and equipment which can be broken down into set installments.

The main benefits of a finance lease are that the lessee can benefit from the use of a highly valuable asset without owning it outright. The related payments are considered an operating expense allowing them to be deducted from taxable profits for accounting purposes.

In conclusion, finance leases are a useful and tax-efficient way of obtaining assets with a long-term lifespan. They enable the lessee to benefit from using the asset without the burden of ownership, and at the end of the agreement the lessee has the option to purchase the asset.