Can anyone give me some real life examples of what a direct financing lease is and sales type leases that are talked about on pgs. 545- 553 of the FSA book? I’m trying to get a better understanding of the difference. Thanks!
direct financing is when a leasing company typically buys assets and leases them. sales type is for ex a manufacturer of airplanes which leases you the assets instead of selling it, which is very common in that industry
Direct financing lease: You go to Shady Rent 'n Buy, pick out a Sony plasma TV from a brochure, Shady Rent 'n Buy pays for the plasma TV from Sony, you then sign a lease agreement with Shady Rent 'n Buy agreeing to make monthly payments on the TV for the next 5 years, after 5 years the payments stop and you own the TV. Of course it’s hellish expensive - a company I came across charged an Effective annual rate of 56%