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Leveraged Lease ✈️

Definition: A lease arrangement involving three parties instead of two. Used for "Big Ticket" assets (Airplanes, Ships, Oil Rigs) costing huge amounts.

Parties:

  1. Lessor (Equity Participant): Puts only small money (e.g., 20%).
  2. Lender (Debt Participant): Puts majority money (e.g., 80%). Usually a Bank/Consortium.
  3. Lessee: User of the asset.

How it Works ⚙️

  1. Lessor buys the asset (Plane) but pays only 20% from own pocket.
  2. Lessor borrows remaining 80% from Lender.
  3. Lessee pays rentals.
  4. Rentals are split:
    • Part goes to Lender (to repay loan).
    • Part goes to Lessor (profit).
  5. Security: The asset and the lease rentals are assigned to the Lender.

Why "Leveraged"? Because the Lessor uses "Leverage" (Debt) to buy the asset. He gets tax benefits of ownership (Depreciation) on 100% value by investing only 20%!

Quiz Time! 🎯

Test Your Knowledge

Question 1 of 4

1. How many parties are involved in a Leveraged Lease?

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💡 Final Wisdom: "Leveraged Lease is the magic of finance. You own a Boeing 747 by paying only 20% cost, and get tax breaks for the whole plane!" ✈️🎩

Next up: Sale and Lease Back - Unlock cash from your own assets! 🔓

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