Finance Lease Law and Legal Definition

Finance lease refers to a financial arrangement used by a business to finance capital equipment. Generally, under a finance lease, the lessee negotiates directly with the supplier or manufacturer and then arranges for the lessor to buy the goods to lease them to the lessee. However, the lessor does not select, manufacture, or supply the goods. Under a finance lease, the lessee receives a copy of the contract by which the lessor acquired the goods.

In GE Capital Corp. v. National Tractor Trailer Sch., 175 Misc. 2d 20 (N.Y. Sup. Ct. 1997), it was held that the lessee's promises under the finance lease contract becomes irrevocable and independent upon the lessee's acceptance of the goods.

Finance leases are considered as security agreements. They are granted exclusively by a financial institutions in order to help a commercial customer to obtain an expensive capital item that the customer might not otherwise be able to afford.