Lease Purchase

Formal

A Capital Lease (see definition) that specifically allows the customer a right to purchase the equipment at the end of the lease period. Therefore this is a form of Hire Purchase - with all the risks of ownership vesting with the user. Reported ‘On Balance Sheet’.

Real-world Example

A business acquires machinery through a lease purchase agreement, paying instalments over time with an option (or obligation) to take full ownership at the end - similar to hire purchase but often used for larger commercial assets.