Legal Definitions - leveraged lease

Definition: A leveraged lease is a type of lease where the lessor (the owner of the asset) borrows money from a third party to finance the purchase of the asset, and then leases it to the lessee (the user of the asset) for a rental payment. The lessor uses the rental payments to repay the loan and earn a profit.

Example: A company wants to lease a new piece of equipment for their manufacturing plant. The lessor, who is a financial institution, borrows money from a bank to purchase the equipment and then leases it to the company for a monthly rental payment. The lessor uses the rental payments to repay the loan and earn a profit.

This example illustrates how a leveraged lease allows the lessor to finance the purchase of an asset without using their own funds, and earn a profit by leasing it to a lessee.