What's the difference between financial leasing and mortgage?

Financing lease, the popular explanation is similar to your mortgage.

Mortgage loan: the bank loans to buy a house, you repay the mortgage, the house belongs to you, and the house belongs to you after the loan is repaid.

In fact, financial leasing is to realize financing in the form of melting things.

For example, if you need to buy a piece of equipment, but you don't have enough money, you can find a financial leasing company. They will help you buy the equipment you need, and then you can have the right to use the equipment and the income by paying a certain down payment, and there will be some interest in each period.

The difference is: mortgage the house, the ownership of the house belongs to the borrower; For financial leasing, the ownership of the leased property is nominally owned by the lessor. (After the lease expires, the ownership shall be determined according to the contract)

Financial leasing is the most common and basic form of non-bank finance in the world. It means that the lessor enters into a supply contract with a third party (supplier) at the request of the lessee (user), and according to this contract, the lessor invests to purchase the equipment selected by the lessee from the supplier. At the same time, the lessor enters into a lease contract with the lessee, leases the equipment to the lessee, and collects a certain rent from the lessee.

Difference from traditional leasing

An essential difference between financial leasing and traditional leasing is that traditional leasing calculates the rent based on the time when the lessee leases the property, while financial leasing calculates the rent based on the time when the lessee occupies the financing cost.

It is a highly adaptable financing method when the market economy develops to a certain stage. It is a new way of trading in the United States in the 1950s. Because it adapted to the requirements of modern economic development, it developed rapidly around the world in the 1960s and 1970s. Nowadays, it has become one of the main financing methods for enterprises to update equipment, and is known as "sunrise industry".

This business model has developed rapidly for more than 30 years since it was introduced to China in the early 1980s. However, compared with developed countries, the advantages of leasing are far from being brought into play, and the market potential is great.