Leveraged leasing

Leveraged lease is basically a form of tax-cut leasing. The lessor invests 20% -40% of the total purchase price of the leased object, and most of the remaining fund is loaned from the bank in the name of the lessor, to buy the leased object and lease it to the lessee. The lessor is required to use the leased property as the mortgage and transfer the related equities to the lender. 　　This form of leasing is more complicated in structure; however, the benefits are that the lessor can both have the ownership of the leased property and enjoy the same tax benefits as he can obtain if he fully invests in the leased property; in addition, part the benefits of tax cut are transferred to the lessee through reducing the rental fee; therefore the lessee can bear lower financing cost than otherwise. 　　Leveraged lease metaphorically uses the lever principle in physics, that is, a heavy object can be lifted with less force by making use of a fulcrum and a long arm. In leveraged lease, the leasing part is the lever, and by means of the leverage function of finance, and by taking full advantage of the tax benefits of local country of the lessor, the parties of the transaction, especially the lessor, the lessee and the lender, can obtain more economic benefits than common leasing modes. Leveraged lease is generally suitable for aircraft leasing and other leasing items of larger monetary values.