Mcom II

105-2015
2016-17

Financial services
Procedure of leasing

ORIGIN OF LEASING:
The history of the leasing dates back to 200 B.C. when
Sumerians leased goods. Romans had developed full body law
relating to lease for movable and immovable property.
However the modern concept of the leasing appeared for the
first time in 1877 when the bell telephone company began
renting telephones in the USA.
The concept of leasing was pioneered in India during 1973.The
first company was set up by Chidambaram group in 1973 in
madras. The company undertook leasing of industrial
equipment as its main activity. In todays modern era leasing
has grown tremendously.

MEANING OF LEASING
A lease is a contractual arrangement calling for the lessee
(user) to pay the lessor (owner) for use of an asset. Property,
buildings and vehicles are common assets that are leased.
Industrial or business equipment is also leased.
a lease agreement is a contract between two parties, the lessor
and the lessee. The lessor is the legal owner of the asset; the
lessee obtains the right to use the asset in return for regular
rental payments.

MODUS OPERANDI / PROCEDURE OF LEASE

1. Selection of the asset:
The lessee selects the asset. This involves specifications of the
asset item, supplier, price, terms of the warranties, delivery
period, installation and service etc. the lessor normally does not
involve himself at this stage.
2. Submission of application:
lessee approaches the lessor (s) and submits the formal
application.

3. Terms of lease

Terms of the lessee are negotiated and finalized with the lessor
offering

the best.

4. Signing the lease agreement

The lessor and lessee sign the lease agreement giving details
such as:

The basic lease period during which the lease is irrecoverable

Rental payments

Renew or purchase

Payments of various expenses etc.

The lessee assigns purchase rights to the lessor.

5. Purchase of asset
The lessor purchases the asset from the manufacturer or the
dealer.

6. Delivery of the asset

The asset is delivered to the lessee who issues a certificate
to the lessor for having inspected the asset and confirming
to the specifications.

7. Service terms
The assignable guarantees and service terms are passed on to
the lessee. The lessee insures the equipment and endorses the
insurance policy in the favour of the lessor.
8. Rental payment
During the lease period, the lessee pays the rentals regularly
as agreed upon and enjoys the use of the asset.
9.Transfer of asset
At the end of the lease period, the asset is transferred back to
the lessor. However, in long term lease contracts, the lease
may be given an option to buy or renew the lease.

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