Definition of finance lease

fixed-term lease, usually noncancellable, used by businesses in financing capital equipment. The lessor's service is limited to financing the asset, whereas the lessee pays all other costs, including maintenance and taxes, and has the option of purchasing the asset at the end of the lease for a nominal price. It is also called a full-payout lease because the lease is fully paid out (amortized) over its lifetime. Contrast with operating lease.