Concept and Classification
The conceptual aspect of leasing include its meaning and essential elements. Meaning Conceptually, a lease may be defined as a contractual arrangement transaction in which a party owning an asset equipment (lessor) provides the asset for use to another transfer the Fight o use the equipment to the user (lessee), over certain for an agreed period of time for consideration in form of in return for periodic payment (rentals), with or without a further payment (premium). At the end of the period of contract (lease period), the asset equipment reverts back to the lessor unless there is a provision for the renewal of the contract. Leasing essentially involves the divorce of ownership from the economic rise of all asset equipment. It is a device of financing the cost of an asset. It is a contract in which a specific equipment required by the lessee is purchased by the lessor (financier) from a manufacturer vendor selected by the lessee. The lessee has possession and use of the asset on payment of the specified rentals over a predetermined period of time. Lease financing is, thus, a device of financing money lending. The position of a lessee is akin to that of a person who owns the same asset with borrowed money. The real function of a lessor is not renting of the asset but lending of funds finance credit, and lease financing is, in effect, a contract of lending money. The lessor (financier) is the nominal owner of the asset as the possession and economic use of the equipment vests in the lessee. The lessee is free to choose the asset according to his requirements and the lessor does not take recourse to the equipment as long as the rentals are regularly paid to him.