Modern equipment leasing originated in USA in 1950’s and developed in Europe & Japan in the 60’s and the rest of the world thereafter. Today leasing is establishing in over 50 countries of the World with total Lease volume in excess of US $ 450 billion. Leasing developed as an alternate source of funding in all developed and newly industrialized countries; the growth of leasing paralleled the growth of the respective economies. This is particularly true of Japan, Korea, Taiwan, Hong Kong and Malaysia. Leasing has added a new dimension to modern financial management.
The basic concept of leasing is that profit is earned through use of an asset and not its ownership. Leasing effectively increase the total availability of capital as it diversifies the sources of finance available to a business.
The Legal substance of a lease transaction is passing possession of a fixed asset without passing the legal ownership. A lease is a contract between a lessor and a lessee for the hire of a specific and identifiable asset for a specific and defined period of time against payment of rentals. Under the lease contract the lessor gives the lessee the right of quit enjoyment of the lessee exercising due care in the use of the asset.