LEVERAGED LEASE
A three-party lease agreement that is partially financed by the lessor via a third-party financial institution. In other words, the lessor will borrow funds to finance the asset to be leased. The lending company has the title to the leased asset and the lessor drafts the agreement with the lessee. Then, the lessee gives payments to the lessor, and the lessor gives the payments to the lender.
In this contract, when the lender provides the financing, it is without the recourse to the lessor. In the event of a default, the lender may repossess the leased asset. Leveraged lease is a true or tax-oriented leases because the lessor enjoys all the tax benefits of depreciation, and the lessee may claim the full amount of the payment as expenses.
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