Through financial leases, all the risks and rewards of ownership are transferred from the legal owners of goods (lessors) to users of the goods (lessees). Financial leases are classified as loans. Financial leases that permits consumers to acquire durables through household debt arrangements instead of conventional loan contracts.
What is Financial Leasing Company?
According to IMF's Monetary and Financial Statistics Manual,
"Financial leasing companies engage in financing the purchase of tangible assets. The leasing company is the legal owner of the goods, but ownership is effectively conveyed to the lessee, who incurs all benefits, costs, and risks associated with ownership of the assets."
Lessee Advantages of Financial Leasing Company
Here Lessee (user) has many advantages like almost cent percent financing, the same leased asset becomes primary guarantee, long term financial support which may go upto the life-cycle of the asset, and flexibility in repayments. Financial Leasing companies may not follow a strict change of ownership as in collateral loan system because it transfers substantially all the risks and rewards incidental to ownership of an asset.
Beneficiary Models Under Financial Leasing Business
Some of the most suitable business sectors are Individuals or Retail financing, Transport operators, Industries, Medical fields like hospitals / clinics / Laboratories, and Educational institutions.