What is a financial lease?

May 02, 2021
A lease is a financial agreement between two parties. A company owns something considered to be an asset – like tires, a mattress, furniture, or car – and gives another party the rights to use that asset in return for lease payments.

The owner of the asset is the lessor and the party making the payments is known as the lessee. The lessee agrees to the lessor’s terms, such as when payments are to be made and how the item is to be used. For example, a lessor may only allow a lessee to use a car for personal use and not for business use.

Lease agreements are legal contracts and enforceable by law. After leasing an item for an agreed amount of time, the item may be returned to the owner or become the property of the lessee. Other contracts allow the lessee to purchase the item for an additional amount once the lease contract is up.

Lease agreements can vary depending on the items leased and time frame. If you’re signing a lease for the first time, there are things you should look for:

  • Information stating the parties involved in the agreement
  • The date the lease starts and how long the agreement is to last
  • The monthly payment amount (or lump sum amount, if applicable)
  • The object being leased as identified by an address, model number, serial number, etc.
  • Conditions for renewal or non-renewal, once the lease term is up
  • Conditions required to lease the item, such as insurance for loss, restricted use, care, and maintenance, etc.
  • Clause for termination of the lease if cancelled or completed early

If these items aren’t included in a lease agreement, you should ask the company or person providing the lease to include them.

Leasing may benefit anyone that is financially unable to buy an item outright. It’s a way to make manageable monthly payments on something when you can’t afford the entire cost upfront.

Companies may offer leasing agreements dependent upon credit ratings. If you have bad credit or no credit, you may still be able to get a lease. However, your payment may be higher than someone with a good credit score. A lease may be a better option than a payday or title loan because the payments are usually more affordable.

There are positives and negatives of a financial lease. Understanding them will help you make an informed decision.

Leasing can have many benefits, such as:

  • Lower monthly payments than traditional loans
  • You only pay on the value of the property you’re using during the terms of the lease
  • Upfront costs may be less
  • May be shorter term than a conventional loan

Leasing may also have drawbacks:

  • Specific limitations can be negative when leasing. For example, a car lease typically restricts the number of miles you can drive or only allows you to use it for personal use
  • Lessor’s may require that you return the item in its original condition at the end of the term
  • Total costs may be higher in the long run
  • Maintenance may be the lessee’s responsibility, which can add costs


  • Understand the terms of the lease. If there’s a word or phrase you don’t understand, ask. A lease is legally binding, so make sure you clearly understand what you’re agreeing to.
  • Read the entire agreement before you sign it.
  • Double check the math and make sure everything adds up.
  • Know the value of the equipment, vehicle, or other property that you are leasing.


  • Don’t say no to gap insurance. For a little extra, you can protect yourself from unexpected life events such as a job layoff, health crisis, relocation, or other disruption.
  • Don’t sign an open-ended lease. You need a date when you either own the item or have a chance to purchase it at the end of the lease period.
  • Don’t lease without knowing exactly how much you are paying.

There are many companies offering lease agreements. It depends on what you’re looking for. Car dealerships, furniture companies, and jewelry dealers may offer lease options in addition to credit and cash programs.

Be cautious of companies that offer leases with extremely high interest rates and unfavorable contract terms. Snap Finance is a unique financing company that offers lease options for large purchases. Snap’s program is designed to help customers with bad or no credit get the items they need at an affordable rate.

When looking at lease options, it’s important that you feel comfortable with the terms of the contract. If something feels off or you can’t get answers about specific questions, you should be wary of signing the agreement and look for other lenders. Understanding financial lease will help as you consider the many options available in the marketplace.

The content of this article is for informational purposes only and should not be construed as personalized legal, financial, or other advice. This article represents paid promotional material provided by or on behalf of Snap Finance, LLC, or its affiliates.