Leases Equipment Law and Legal Definition

The features of equipment leases will depend upon the type of leased product, transaction size etc. Generally, equipment leases are classified into small ticket, medium ticket and big ticket leases.

Small ticket leases are small transactions, normally of a retail variety, and would mostly include consumer leases. Here, both the product and the obligors are diversified, and the quality of the issuer is given the prime significance.

In the medium ticket segment comes leases of office equipment, printing machinery, small machinery items, etc.

Big ticket items are heavy industry machinery, high cost medical equipment such as MRI equipment, etc. There is a higher degree of concentration here and therefore increased risk.

In case of lease transactions it is possible for a lessor to merely transfer the receivables, without transfer of the residual ownership interest in the equipment, to the special purpose entity (SPE), an intermediary that holds the receivables on behalf of the end investors. The practice in this regards differs from country to country, primarily dependant on the issues related to taxation, capital allowances etc. If the lease in question entitles the lessor to capital allowances, presumably by retaining the ownership of the equipment, the lessor will also retain his eligibility to capital allowances. In some countries, the tax issues could be implications of sales-tax/ value added tax on sale of the equipment.