Leveraged leases

Leveraged leases are financial arrangements in which a company leases an asset, such as equipment or property, with a combination of debt financing and equity investment. In a leveraged lease, the lessor (the company leasing the asset) borrows a significant portion of the funds needed to acquire the asset, and the borrowed funds, along with the equity investment, are used to finance the lease. The lease payments made by the lessee (the company using the asset) are used to repay the debt and provide a return on the equity investment.