Financial leasing

4. The lessee acquires the right to use a durable good in exchange for rental payments over a predetermined and protracted term. If all risks and rewards of ownership are, de facto though not de jure, transferred from lessor to lessee, the lease is a financial one. In financial leasing, the leasing period covers all, or most of, the economic lifetime of the durable good. At the end of the leasing period the lessee often has the option to buy the good at a nominal price. The lessor does not need to possess any expertise about the good in question. He offers no repair, maintenance or replacement services to the lessee. Normally, the good is chosen by the lessee and delivered directly to him by the producer or seller. The lessor’s role is thus purely financial.

The ESA recognises the economic reality behind financial leasing by recording it as follows: the lessor provides the lessee with a loan enabling the lessee to purchase a durable good, of which the lessee becomes the de facto owner. Thus, the system treats the durable good as if owned by the lessee from the beginning of the leasing period. Rentals actually paid by the lessee to the lessor have to be subdivided into repayments of principal and interest payments related to the imputed loan.