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Simple English definitions for legal terms
lease-purchase agreement
Read a random definition: Smith Act
A quick definition of lease-purchase agreement:
A lease-purchase agreement is a way to buy something by making payments over time. It's like renting something, but with the option to own it at the end. You get to use the thing you're buying right away, but you don't own it until you make all the payments. This is often used for big things like cars or equipment. When you're done making payments, you own it!
A more thorough explanation:
A lease-purchase agreement is a type of rent-to-own purchase plan where the buyer takes possession of the goods or property with the first payment and takes ownership with the final payment. It is also a lease of property, especially equipment, where ownership of the property is transferred to the lessee at the end of the lease term. This type of lease is usually treated as an installment sale, and the lessee is responsible for paying taxes and other expenses on the property under a capital lease.
Example 1: John wants to buy a car but cannot afford to pay for it upfront. He enters into a lease-purchase agreement with the car dealer. John makes monthly payments for a set period, and at the end of the lease term, he will own the car.
Example 2: ABC Company needs a new printing press but cannot afford to buy one outright. They enter into a lease-purchase agreement with a leasing company. ABC Company makes monthly payments for a set period, and at the end of the lease term, they will own the printing press.
These examples illustrate how a lease-purchase agreement works. The buyer or lessee takes possession of the property or goods and makes payments over a set period. At the end of the lease term, the buyer or lessee owns the property or goods. This type of agreement is beneficial for those who cannot afford to pay for the property or goods upfront but can make monthly payments over time.