Types of Leases

Although they come disguised under many names, you'll find that there are basically two types of leases: finance and true.

Finance leases
Also known as capital lease, conditional sale, or dollar buy out, these leases work best if you intend to keep the equipment at the end of the lease. The main advantage of this type of lease is that it gives you the option to purchase the equipment for a nominal fee, usually $1.00. Payment terms on finance leases tend to last close to the expected useful life of the equipment.

True leases
True lease payments (a.k.a. tax-, operating-, or FMV-lease), on the other hand, do not usually span the full expected life of the equipment. At the end of the lease, you can choose to walk away from the equipment or purchase it at fair market value.

Payments on true leases generally tend to be lower than those on finance leases. This is because lessors have the opportunity to resell the equipment when the lease ends.