Leasing and Hire Purchase - Comprehensive Notes | MODULE D: FINANCIAL PRODUCTS AND SERVICES
Leasing and Hire Purchase - Complete Study Notes Lease Finance Lease finance is an arrangement where one party (lessor) provides an asset for use to another party (lessee) for a specified period in exchange for periodic payments called lease rentals. It allows businesses to use expensive equipment without purchasing them outright, preserving working capital. Mathematical Example: Suppose a machine costs ₹10,00,000 and is leased for 5 years at an annual lease rental of ₹2,50,000. Find the Net Present Value (NPV) of leasing at a discount rate of 10%. NPV = Σ [Lease Rental / (1 + r)^t] = (2,50,000 / 1.1) + (2,50,000 / 1.1²) + (2,50,000 / 1.1³) + (2,50,000 / 1.1⁴) + (2,50,000 / 1.1⁵) = ₹9,47,808.24 Evolution of Leasing in India Leasing was formally introduced in India in the late 1970s. Financial institutions like First Leasing Company of India pioneered the leasing industry. Over time, regulat...