Change your car as often as you want!

Last week, we introduced the concept of leasing and talked about its more popular form, the financial lease. By way of review, a financial lease, which we can also refer to as asset lending, is like a loan from a bank to acquire an asset (say, an equipment), backed up by a chattel mortgage. The difference is that the ownership of the asset being financed stays with the lessor even as the lessee pays monthly amortizations. At the end of the lease, ownership of the asset is transferred to the lessee.

Let’s talk about the other type of lease as practiced here in the Philippines: the operating lease. An operating lease is a “true lease,” so to speak, because the lessee pays only for the use of the asset. The asset is not turned over to the lessee at the end of the lease contract.