True Lease

DEFINITION of 'True Lease'

A specific type of multi-year lease which does not pass on ownership rights of the asset to the lessee. A true lease is an arrangement where the lessor (the person granting the lease) bears both the risks and rewards of ownership of the property. The lessee merely gets to use the property in a rental fashion.

BREAKING DOWN 'True Lease'

True leases stand in contrast to financial leases. Financial leases pass more of the aspects of ownership on to the lessee, such as maintenance and tax benefits from depreciation. Financial leases are often treated as loans by the IRS, whereas true leases are not.

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